Friday, September 21, 2018

Those Soaring Corporate Profits

These are boom times for American corporations. The Commerce Department said this week that after-tax profits across the U.S. rose 16.1 percent in the quarter ended June 30 from a year earlier. That's the largest year-over-year gain in six years.

Lower taxes were a big driver of this. Because of the lower corporate tax rate signed into law last year, taxes paid by U.S. companies in the quarter were down 33 percent from a year earlier, according to the government data, or more than $100 billion at an annual rate.

Strong economic growth also played a role. The Commerce Department recently revised upward its estimate of how fast the U.S. economy grew in the second quarter, to an annual rate of 4.2 percent from an earlier estimate of 4.1 percent.

Thursday, September 20, 2018

Safety First

What's been driving the market rally in September? A flight to security. This month, the biggest gainers in the S&P 500 include firms focusing on telecommunications services, consumer staples and utilities—so-called safe sectors whose steady dividend payouts have long made them investor favorites when markets are volatile or declining.

These shares typically lag behind major indexes during rallies, in part because they are perceived to offer limited potential gains. But in September, telecom shares are up 3.1 percent, consumer staples are up 1.5 percent and utilities are up 1.5 percent, versus a 0.1 percent increase in the S&P 500.

Meanwhile, many well-known high-flyers have been tumbling. Apple, Amazon.com and Alphabet each has declined at least 3 percent apiece in September, partly reversing double-digit percentage gains for the year. Facebook has declined more than 8 percent this month, adding to its retreat in the second half of this year.

Wednesday, September 19, 2018

The Strength of the U.S. Market

The American economy is increasingly becoming the envy of the world. The latest evidence: According to the latest monthly survey of fund managers by Bank of America Merrill Lynch, released yesterday, global investors are favoring U.S. stocks more and more strongly.

There is currently a net allocation of 21 percent overweight to the United States equity market, the highest such level since January 2015, and the U.S. was named as the most favored equity region globally for a second straight month. The allocation to global equities fell 11 percentage points to a net overweight of 22 percent, slightly below the long-term average.

In large part, the optimism about U.S. stocks is related to the outlook for corporate profits. According to the survey, a net 69 percent of those polled said that U.S. is the most favorable region when it comes to earnings expectations, a record level in the 17-year history of the survey. Currently, the divergence between U.S. and emerging-market earnings expectations is at the widest it's been since January 2014.

Tuesday, September 18, 2018

The U.S.: Bad for Retirement?

The U.S. ranked just 16th as one of the best nations to retire in, according to the 2018 Global Retirement Index, just released by Natixis Investment Managers. The U.S. maintained its top 10 ranking for finances, chiefly because of improvements in tax pressure, fewer nonperforming bank loans and rising interest rates, which improve saving levels and income in retirement. But the U.S.’s quality of life sub-index score declined in the 2018 index, and its happiness indicator score, which evaluates the quality of retirees’ current lives, also fell.

So which countries provide a better retirement landscape than the U.S.? Here is Natixis' Top Ten:
1. Switzerland
2. Iceland
3. Norway
4. Sweden
5. New Zealand
6. Australia
7. Ireland
8. Denmark
9. Canada
10. The Netherlands

Monday, September 17, 2018

The Good News on Inflation

August's consumer-price index was a welcome slowdown on the inflation front. The CPI, which gauges what Americans pay for everything from rent to razor blades, was up 2.7 percent from a year earlier, a drop from the prior two months. Core inflation, which excludes food and energy, rose 2.2 percent, slightly slower than in July.

Worker pay gains, by contrast, are accelerating. Adjusted for inflation, hourly earnings rose 0.2 percent from a year earlier. While modest, that’s an improvement from the prior three months when there was no real wage growth.

That's significant because since the recession ended, inflation-adjusted pay is up just over 4 percent for American workers. Inflation-adjusted wages are up less than 1 percent for all workers and a scant 0.2 percent for production and nonsupervisory workers over the past two and a half years.

Friday, September 14, 2018

Lehman, Ten Years Later

Ten years ago this weekend, the U.S. government allowed a major global investment bank, Lehman Brothers, to file for bankruptcy. It remains the largest bankruptcy filing in U.S. history, with Lehman holding over $600 billion in debts.

By that point, Lehman had already announced an expected $3.9 billion loss in its third quarter, as well as a near $5.6 billion loss in write-downs of so-called "toxic" assets. In the first week of September, Lehman's stock dropped drastically, losing more than three quarters of its value. The Fed had already helped salvage Bear Stearns, but there was to be no bailout for Lehman.

The American economy was already technically in recession at that point, but the Lehman bankruptcy seemed to trigger an entire meltdown of the U.S. financial system.  By the time it was over with, an estimated 6 million jobs were lost, unemployment reached 10 percent, and the Dow Jones Industrial Average dropped an astounding 5,000 points. Let's hope we never see the likes of that again.

Thursday, September 13, 2018

The Value of a Degree

Is a college degree losing its value? The Census Bureau’s annual report on income and poverty released yesterday highlights this depressing fact: Among bachelor’s degree recipients, roughly 3.6 million or 4.8 percent were living in poverty in 2017, according to the Census Bureau. That’s up from 3.3 million and 4.5 percent in 2016. Bachelor’s degree recipients were the only educational cohort to see the number or the share of people in poverty rise among their ranks.

Even with this increase, though, among educational attainment groups, people with at least a bachelor’s degree had the lowest poverty rates in 2017. People with at least a bachelor’s degree in 2017 represented 35.0 percent of all people aged 25 and older, but just 16.5 percent of people aged 25 and older in poverty.

The 2017 poverty rate for those with a high school diploma but with no college was 12.7 percent, down from 13.3 percent in 2016. For those with some college but no degree, 8.8 percent were in poverty in 2017, a decline from 9.4 percent in 2016.

Tuesday, September 11, 2018

New Highs in Small Business Optimism

U.S. small business optimism surged to a record in August, according to a new survey by the National Federation of Independent Business. The NFIB Small Business Optimism Index jumped to 108.8 last month, the highest level ever recorded in the survey's 45-year history and above the previous record of 108 in 1983, set during the second year of Ronald Reagan's presidency.

The August figure was up from an already strong 107.9 reading in July. Six of ten indicators tracked by the NFIB increased last month. The biggest gain came in plans to increase inventories.

On top of that, the NFIB noted record readings for job creation plans and the amount of owners saying it was a good time to expand. Capital spending plans reached their highest level since 2007.

Consumers Keep Borrowing

Here's another sign of a strong economy: Consumer borrowing accelerated in July, the Federal Reserve reported yesterday. Total consumer credit rose $16.6 billion in July to a whopping $3.91 trillion. That’s an annual growth rate of 5.1 percent.

The bulk of the increase came from nonrevolving credit, which is typically auto and student loans. Those debts rose  6.4 percent in July after a 4 percent gain in the prior month, for the category's largest increase in eight months.

On the other hand, revolving credit, such as credit cards, rose only slightly in July. Borrowing on credit cards rose by 1.5 percent, although that was a reverse from a 1.4 percent drop in June.


Monday, September 10, 2018

The Emerging Markets Meltdown

While emerging-market stocks were one of the strongest equity performers in 2017, they have collapsed this year. The MSCI emerging-markets index fell into-bear market territory last week, dropping 20 percent from a recent peak. The Vanguard FTSE Emerging Markets ETF lost 3.3 percent last week, its worst week since March. Year-to-date, it is down 11.5 percent.

Meanwhile the S&P 500 has gained 7.7 percent this year. According to Bespoke Investment Group, the divergence between emerging markets and the U.S. stands at a 14-year high.

There are a number of issues facing emerging economies, including a recession in South Africa, Turkey’s high levels of debt and inflation, political uncertainty in Brazil, and Argentina’s central bank raising interest rates to 60 percent in the face of a currency crisis. Additionally, the category has been pressured by a rising U.S. dollar—a headwind for many emerging markets.

Friday, September 7, 2018

August's Jobs Report

The economy had another strong month, adding 201,000 jobs in August, the Labor Department reported this morning. Over the last three months, employers have added an average of 185,000 workers to payrolls per month, slightly outpacing 2017’s average monthly growth of 182,000. The headline unemployment rate remained at 3.9 percent.

The biggest news in the August employment report was a sharp increase in pay. The average wage paid to American workers rose by 10 cents to $27.16 an hour. The yearly rate of pay increases climbed to 2.9 percent from 2.7 percent, reaching its highest level since June 2009.

White-collar professional firms filled 53,000 positions, bringing the total created over the past 12 months to more than half a million. These are the fastest growing jobs in the country.

Thursday, September 6, 2018

The Markets and the Election

What does the upcoming election season mean for the stock market? A quick look at historical performance shows that stocks often see rough sledding in the September of years that feature midterm elections. But stocks tend to do just fine as Election Day nears as well as in the aftermath of the vote, regardless of the outcome.

Analysts at UBS note that the S&P 500 has rallied an average of 14.5 percent from the end of August to the end of March around midterm elections. That includes a rocky start, marked by a median decline of 1.4 percent from the end of August through early October, followed by a rally into the next year.

This rally in equities around midterm elections has actually been much stronger than the average returns seen in all other years. Taking a more short-term approach, Deutsche Bank has noted that the three-month period running from a month ahead to two months after the election has produced a median 8 percent gain.

Tuesday, September 4, 2018

Inflation Curiosity

The good news is that most investors take inflation into account for their retirement savings, according to a recent Nuveen survey of adults with at least $100,000 in investable assets. The bad news: Most investors don't know what the inflation rate is.

Most respondents said they carefully monitored inflation as they planned for retirement, invested or spent money. Some seven in 10 investors correctly recognized that inflation was low at present, and they largely understood that retirees experienced higher inflation rates than the norm.

Yet, 60 percent incorrectly said the U.S. inflation rate was 5 percent or higher or admitted that they were not sure. Only 32 percent came near the real number of 2 percent to 3 percent.

Monday, September 3, 2018

Thoughts for Labor Day

“All growth depends upon activity. There is no development physically or intellectually without effort, and effort means work.” ~ Calvin Coolidge

“If a man is called to be a street sweeper, he should sweep streets even as a Michelangelo painted, or Beethoven composed music or Shakespeare wrote poetry. He should sweep streets so well that all the hosts of heaven and earth will pause to say, 'Here lived a great street sweeper who did his job well.'” ~ Martin Luther King Jr.

"The best way to learn is by doing. The only way to build a strong work ethic is getting your hands dirty." ~ Alex Spanos

Friday, August 31, 2018

America's Old Cars

How old is your car? If it follows the trends of most American drivers, it's probably pretty old. According to a study from the Energy Department, the average age of vehicles owned by households increased from 9.3 years in 2009 to 10.5 years in 2017.

Cars may just be living longer. In 2009, about 7 percent of all vehicles were five years old, and by 2017, this had fallen to just 5.8 percent of all vehicles. But in 2017, there were more vehicles on the road that were 10 years and older than in 2009.

This is up sharply from recent decades. The average car's age rose from just 6.9 years in 1980 to 7.9 years in 1985. For a while, the average age hovered just below 8 years, and as recently as 1992, it was just 8.1 years. But it's risen pretty consistently since then.

Thursday, August 30, 2018

Stocks and Hurricanes

We're now heading into the thick of hurricane season, and various sectors of the market will be positively or negatively affected by the amount of severe weather we experience. But some of these effects are not as obvious as others.

Some of the market segments that react positively to preparation and recovery efforts include home-improvement retailers like Home Depot and Lowe’s, which typically see a boost in sales post-storm as damaged property is repaired. Grocery retailers often see a prestorm surge in sales as consumers stock up on necessities, and hotel companies benefit if people are forced into temporary lodging.

But the industry with the largest negative impact is branded apparel and footwear stocks, according to an analysis by Morgan Stanley. PVH Corp., the parent company of Calvin Klein and Tommy Hilfiger, scored the highest possible “hurricane exposure score” in Morgan Stanley’s analysis, alongside Tiffany & Co. Dunkin’ Brands Group is also among the companies with high hurricane exposure: In the third quarter of 2017, there was a 120 basis-point drag on the doughnut company’s same-store sales because of hurricanes.

Wednesday, August 29, 2018

Housing Hits the Brakes

There are a couple signs out there that the housing market is softening. First off, sales of previously-owned homes, which make up the vast majority of housing market sales, declined for the fourth month in a row in July. They've touched their lowest point in over two years, according to the National Association of Realtors.

Another sign of a slowdown: Although prices are not declining, price growth is decelerating. The national index’s 6.2 percent annual gain was down from 6.4 percent in the three-month period ending in May. The 20-city’s annual gain was also down two ticks, from 6.5 percent.

In addition, the number of new homes available for sale hit its highest level since 2009. At that month’s pace of sales, it would take 5.9 months to exhaust available inventory. Six months has historically been considered a marker of a market evenly balanced between supply and demand.

Tuesday, August 28, 2018

Young People's Money Woes

Young adults are living on the edge with their finances, according to a new study from the University of Illinois. About a third of young adults (those between 18 and 24 years old) were considered “financially precarious,” meaning they had few money management skills and little income stability, according to the study.

Another 36 percent of participants were considered financially “at risk” because they had an unexpected drop in income within the year and had no savings to support themselves - and didn’t have enough to pay for a $2,000 emergency. Approximately 10 percent also said they struggled with money management, such as budgeting and credit-card usage, and would put their health in jeopardy by avoiding doctor visits and prescriptions because of costs.

Only 22 percent were deemed financially stable, meaning they were saving at a mainstream bank and steered clear of financial services that charge higher interest and fees, such as payday lenders. Members of this group were more likely to be white males, employed and college-educated.

Monday, August 27, 2018

The Worst Place to Retire

We talk a lot here about how to get the best out of your retirement years, but what's the worst place to retire? According to a new survey from WalletHub, it's right here in New Jersey. Newark rates as exorbitantly expensive while also having little in the way of activities for retirees. On the bright side, the health care options are good.

Jersey City also finished high up on the list, at No. 8. Its primary advantage over Newark appears to be that there's more to do there. The top ten unfavorable cities for retirees:

  1. Newark
  2. Bridgeport, Conn.
  3. Warwick, R.I.
  4. Baltimore
  5. Stockton, Calif.
  6. Providence, R.I.
  7. Bakersfield, Calif.
  8. Jersey City
  9. Modesto, Calif.
  10. Fresno, Calif.

Friday, August 24, 2018

The Cost of the Crisis

What did the economic meltdown of 2007-2009 cost us? A new report from the Federal Reserve Bank of San Francisco points out that not only is the economy “significantly smaller than it should be based on its pre-crisis growth trend,” but says that Americans lost $70,000 apiece in present-value lifetime income thanks to the financial crisis.

The letter says that “the size of the U.S. economy, as measured by GDP adjusted for inflation, is well below the level implied by the growth rates that prevailed before the financial crisis and Great Recession a decade ago.” Actual U.S. GDP is running about 12 percentage points below where it would have been had the crisis not occurred.

We're not the only ones, though. The report said that the U.K. and European economies are also trailing where they would have been, had the financial crisis and Great Recession not intervened.

Thursday, August 23, 2018

The Record Bull

Welcome to the longest bull market in history. Since March 9, 2009, which marked the low of the financial crisis and which many consider the birth date of the current bull market, the S&P 500 index has advanced 320 percent.

This bull now has 113 months under its belt. The previous longest was set during the 1990s. Then, the S&P 500 index bottomed out on October 11, 1990, and finally peaked nearly ten years later on March 24, 2000.

One advantage for that bull: With the dot-com fueled runup in the late 1990s, that market returned an annual average of 19.0 percent per year. The current buildup, by contrast, has returned a slightly more modest average of 16.5 percent per year.

Wednesday, August 22, 2018

Who Owns America's Debt

America’s debt climbed to a record $21.21 trillion at the end of June, a 6.9 percent increase from a year earlier. Who owns all this money? By and large, Americans. Some 70 percent of the national debt is owned by the U.S. government, institutional investors and the Federal Reserve. A shade under 30 percent is owned by foreign entities, according to the latest information from the U.S. Treasury.

American institutions such as private and state pension funds as well as individual investors were the biggest holders. They owned $6.89 trillion in debt or about 32.5 percent of the entire pie.

Foreigners, led by the Chinese and Japanese, owned $6.21 trillion, or 29.3 percent. Those two countries have cut their stakes since 2015, but each country still owns more than $1 trillion worth of Treasury bonds and notes.

Tuesday, August 21, 2018

Exiting Correction

The Dow Jones industrial average entered what is generally considered to be correction territory on February 8, when it completed a drop of 10 percent from its recent peak. This is the longest stint that the Dow has spent in correction territory since 223 trading sessions in 1961, according to Dow Jones Market Data.

But now the Dow stands less than 0.5 percent shy of emerging from correction territory. It need a gain of just 130 points to reach that mark, and notch a 10 percent gain from its recent low point.

Both the S&P 500 and the Nasdaq Composite Index also moved into correction territory back on February 8. But bot of those indexes have already emerged from their correction phases.

Monday, August 20, 2018

Young Folks Are Finding Work

The unemployment rate among young Americans fell to its lowest level in more than 50 years this summer, the labor Department said last week. On the other hand, the share of young people looking for work remained well below its peak in 1989.

Among Americans between 16 and 24 years old who were actively looking for work this summer, 9.2 percent were unemployed in July. That's a drop from the 9.6 percent youth unemployment rate in July 2017. It was also the lowest midsummer joblessness rate for youth since July 1966.

Similarly, the unemployment rate among older Americans who don’t have a high-school diploma fell to a record low this year. The jobless rate also fell sharply for those who completed high school but never attended college.

Friday, August 17, 2018

The Outlook for Raises

The tight job market means that employers are willing to part with “slightly larger” pay raises when the calendar ticks over, according to a new survey by Willis Towers Watson. The 2018 General Industry Salary Budget Survey finds that U.S. employers intend to reward their non-management exempt employees with average pay increases of 3.1 percent in 2019; this year they handed out pay raises of 3.0 percent. Executives are in for slightly smaller raises, 3.1 percent compared with 3.2 percent.

Pay increases have lagged in the neighborhood of 3 percent for the past 10 years, though only 3 percent of companies intend to freeze salaries next year. The last year in which raises were significantly larger was back in 2008, when they were around 3.8 percent.

Companies are still rewarding “star” performers at a notably higher percentage than “average” performers. Those with top marks in their evaluations got an average raise of 4.6 percent in 2018; that’s 70 percent higher than average-rated employees, who got 2.7 percent raises.

Wednesday, August 15, 2018

A Strong July for Retail

U.S. retail sales rose a healthy 0.5 percent in July, the Commerce Department reported yesterday. The report came with one big caveat, though: The government also said sales in June rose a smaller 0.2 percent instead 0.5 percent as originally reported.

That means the increase in July was starting from a lower baseline. On the other hand, retail sales have increased 6.4 percent over the past 12 months, close to the long-run average since 1980.

Clothing stores and restaurants posted a 1.3 percent increase in sales to lead the way in July. Sales also rose 1.2 percent for department stores and 0.8 percent for both Internet retailers and gas stations. Sales fell for home furnishings, pharmacies and stores that sell sporting goods and other hobby-style items such as books and music.

Our Shrinking Debt Burden

The debt burden of U.S. households is the smallest it’s been in nearly 16 years. Household debt — including mortgages, credit cards, auto loans, student loans and other credit — grew for the 16th consecutive quarter in the three months ending in June, rising by 0.6 percent to $13.29 trillion, the New York Fed reported yesterday. But that's only half the equation.

On the other side, personal disposable incomes reached an annual rate of $15.46 trillion in the quarter. That means the debt-to-income ratio dipped to 86 percent. That’s the lowest, by a very small amount, that this figure has been since the fourth quarter of 2002.

But it's a long way down from where this number peaked. At the height of the credit bubble in 2008, household debts topped out at 116 percent of disposable income.

Tuesday, August 14, 2018

A Slight Slowdown in Consumer Expectations

A monthly survey conducted on consumer expectations showed a notable pessimistic trend in July. The New York Fed’s survey — based on a panel of 1,300 household heads across the United States — found declines in one-year expectations on earnings growth , household spending, stock prices and house prices. Some highlights:

  • Median one-year-ahead wage-growth expectations fell from 2.7 percent in June to 2.4 percent in July, dropping below the 2.5 percent to 2.7 percent range it had been in since November 2017
  • Median home price change expectations dropped from a recent high of 3.9 percent reached in June to 3.7 percent 
  • The probability that stock prices will be higher in a year fell to 40.3 percent, the lowest level since October 2016
  • Median household spending growth expectations decreased by 0.1 percent to 3.2 percent in July

Monday, August 13, 2018

What's Your Goal?

Protection or production? That is the key question for most investors' portfolios. According to a new report from a global research and consulting firm Cerulli Associates, more than three-quarters of investors explicitly state that they would prefer a protection-focused portfolio versus one that outperforms.

The desire for protection is very strongly correlated with age, although not necessarily the way you think it might be. The report finds that a protection mindset is highly concentrated among investors who are 60 and older - and among affluent investors under 30 years old.

There are similar strata involved for different wealth tiers. The highest concentrations of the protection-focused mindset are among those investors with $250,000 to $500,000 (83 percent) and greater than $5 million (80 percent).

Friday, August 10, 2018

Signs of Inflation in July

U.S. consumer prices rose by 0.2 percent in July, pointing to a steady increase in inflation pressures, according to figures out from the Labor Department this morning. In the 12 months through July, the Consumer Price Index increased 2.9 percent.

Excluding the volatile food and energy components, the CPI rose 0.2 percent, the same gain as in May and June. The annual increase in the so-called core CPI was 2.4 percent, the largest rise since September 2008.

Shelter costs were a big driver of this: Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 percent last month after increasing by the same margin in June. Overall, the so-called shelter index rose 3.5 percent in the 12 months through July. Prices for new motor vehicles rose 0.3 percent in July, apparel prices fell 0.3 percent, and healthcare costs fell 0.2 percent.

Thursday, August 9, 2018

The Tight Labor Market

The economy has reached a point of such strength that there are now more job openings in the U.S. than there are unemployed. Overall in June, the number of available jobs exceeded the number of unemployed Americans by nearly 100,000.

There were 6.7 million job openings on average in the three months ended in June—the highest quarterly level on record dating back to 2001. The number of available jobs grew by nearly 750,000 this spring, compared with a year earlier, according to Labor Department data released this week. 

The problem is most acute in a few fields, led by transportation. The number of unfilled jobs in transportation, warehousing and utilities, combined, grew by 109,000 over the past year to 298,000, a 58 percent increase. That's the largest growth rate of about 20 broad groupings tracked by the Labor Department.

Wednesday, August 8, 2018

Misunderstanding Long Term Care

There is a wide disconnect between what many Americans believe about long-term care versus what the actual needs are. Today, 70 percent of Americans will need some type of long-term care, but only 46 percent believe they will need it, according to a new study by the Moll Law Group, a personal injury firm.

Most Americans — 64 percent — have nothing saved for long-term care. In addition, 67 percent aren’t able to contribute to their parent’s long-term care. Most of study participants believe the age at which they will need long-term care is 79 years old, while it’s actually 73. Women will need long-term care on average for 3.7 years, while men will need it for 2.2 years.

Another misconception is the out-of-pocket cost of long-term care. The study found that the actual out-of-pocket cost is more than $47,000, while many Americans believe it is roughly half that, $25,350.

Tuesday, August 7, 2018

Earnings Beats by Sector

Earnings season always features headlines that say companies “beat” or “miss” analysts’ estimates. In the latest quarter, even more companies have been beating than usual, with a total of 80 percent exceeding the analysts' expectations for their earnings per share.

Leading the way has been the health-care industry. The S&P 500's health-care sector has 63 companies, of which 61 (a whopping 97 percent) beat analysts’ estimates when they most recently reported their results. Information technology isn't far behind, at 93 percent.

The worst sector for beating estimates has been energy: Just 55 percent of those stocks exceeded the street's forecast. But notice that even there, a majority of the stocks outperform the estimates.


Monday, August 6, 2018

The Race to $1 Trillion

Apple became the first U.S.-listed company in history to achieve a $1 trillion market capitalization on Thursday. U.S. Steel is generally cited as the first U.S. publicly listed company to reach a $1 billion market capitalization, immediately upon going public in 1901.

IBM is sometimes identified as the first publicly listed U.S. company to reach the $100 billion milestone, doing so on August 20, 1987. However, IBM never closed above that threshold. Meanwhile, AT&T Corp. closed above $100 billion in November 1992, according to FactSet.

A cautionary tale: On July 16, 1999, Microsoft became the first U.S. company to reach a market cap of $500 billion. It stayed above $500 billion for just two trading sessions before dipping back below that level. This was, of course, the heyday of the dot-com boom. Microsoft went on to again hit $500 billion in market value, eventually reaching $607 billion in market cap, in December 1999. But in the spring of 2000, the bubble popped — and Microsoft finished that year with a market cap of $231 billion.

Friday, August 3, 2018

July's Jobs Report

The U.S. economy added 157,000 jobs in July, according to figures out from the Bureau of Labor Statistics this morning. Incorporating revisions for May and June, which increased employment by a net 59,000, monthly job gains have averaged a very healthy 224,000 the last three months.

The unemployment rate ticked down to 3.9 percent after edging up in June, reflecting more job seekers entering the labor market. Another 105,000 people joined the civilian-labor force in July, but that was nearly exactly matched by the increase in Americans reporting they’re not in the labor force.

White-collar professional firms added 51,000 jobs last month, continuing a strong run of employment gains. Manufacturers filled 37,000 jobs. Health-care providers hired 34,000 people.The financial industry and government were the only industries to lose jobs over the month.

Thursday, August 2, 2018

Will You Owe More in Taxes?

Despite the tax cuts that take effect this year, more than 30 million taxpayers could owe money to the government next year, according to a Government Accountability Office report based on a simulation run by the Treasury Department. Taxes for more than a fifth of Americans (21 percent) could be underwithheld, meaning that their employer hasn’t taken enough money out of their paychecks to cover taxes.

Had there been no change in the tax law, 18 percent would have been underwithheld. That’s 3 million fewer people. Six percent of taxpayers are expected to break even next year, and the remainder will get some sort of refund.

So why might more Americans owe taxes next year? The IRS and Treasury Department had “limited documentation” for how it updated the withholding tables, according to the GAO report. And employees in high-tax states - like New Jersey - may be affected by the new limitations on state and local tax deductions, which would increase their tax burden.

Wednesday, August 1, 2018

Apple's Massive Buybacks

Apple reported its earnings yesterday, and also noted that it had bought back $20.8 billion of its stock in the year’s second quarter. That’s down from its record $22.8 billion worth of buybacks in the first quarter, but still ranks as the second-largest ever among S&P 500 companies, according to S&P Dow Jones Indices.

Apple's first quarter repurchases made up the entirety of 12 percent of S&P 500 buybacks. Companies in the broad index bought back $189 billion in the first quarter, according to S&P Dow Jones Indices, and are on pace to be about flat in the second quarter.

If Apple hadn’t bought back its stock, the S&P 500′s total buybacks wouldn’t have set a new record high in the first quarter. Subtracting out Apple buybacks from all quarters would have left first quarter buybacks trailing the third quarter of 2007.

Tuesday, July 31, 2018

Inklings of Inflation

Are we seeing signs of higher inflation? According to the Wall Street Journal, consumers are starting to see higher prices for recreational vehicles, soda, beer and other goods that now cost more to make as a result of recent tariffs on metals and parts.

U.S. steel and aluminum prices are up 33 percent and 11 percent, respectively, since the start of the year. Producer prices, a measure of what businesses are paid for goods and services, have also climbed to their highest level in years. The producer-price index rose 3.4 percent in June from a year earlier as energy and shipping costs climbed along with metal prices.

Those higher costs are starting to show up in what we pay for retail goods. Consumer prices rose 2.9 percent in June from a year earlier, the Labor Department said, the highest rate in more than six years.

Monday, July 30, 2018

That Huge GDP Number

Gross domestic product grew by 4.1 percent in the second quarter, according to numbers released by the Commerce Department on Friday. This is the best quarter we've seen since a 4.9 percent in the third quarter of 2014. What went right?

  • Personal consumption expenditures rose 4 percent  
  • Business investment grew 7.3 percent 
  • Exports added 1.06 of the 4.1 percent total with their largest positive result since the fourth quarter of 2013
  • Federal government outlays increased by 3.5 percent

Friday, July 27, 2018

Facebook's Big Plunge

After its disappointing earnings report on Wednesday, Facebook's stock took a bath yesterday with its biggest single-day drop since it started trading publicly in May 2012. On a market-capitalization basis, the company saw $120 billion erased, the biggest one-day loss in U.S. stock-market history.

The decline exceeded the previous record set by Intel, which had a $91 billion single-day loss in September 2000.  In just a single day, the decline in Facebook’s market value was roughly the entire market value of McDonald’s or Nike.

Remember, though, that a loss of this magnitude is only possible if the company is gigantic to begin with. Facebook dropped to a $510 billion valuation from a peak of $630 billion, after an eye-popping 472 percent run-up in its stock price since going public.

Thursday, July 26, 2018

Millennials: Not Good Investors

According to a new study from Bankrate.com, many millennials think cash is the best long-term investment. Almost one in three millennials said cash instruments, such as savings accounts and certificates of deposit, are the best place to invest money they won’t need for the next 10 years. That compares with only 21 percent of older generations, most of whom prefer the stock market.

Cash is, of course, not a good investment, especially these days. Only 18 percent of all American adults are earning more than 1.5 percent on their savings, at a time when top-yielding national available savings and money-market accounts are yielding interest rates of more than 2 percent. Baby boomers are the generation most likely to earn more than 1.5 percent on their cash.

Millennials - defined as those between the ages of 18 and 37 - aren't even doing that well. More than one in five millennials said they’re earning less than 1 percent interest on their savings, while roughly 19 percentsaid they’re not earning any interest whatsoever, according to the study.

Wednesday, July 25, 2018

Google's investment Savvy

What helped fuel Google's earnings blowout earlier this year? The same thing that fuels a lot of our wealth: Alphabet, Google's parent company, is a savvy investor. Alphabet gained more than $1 billion just on its outside investments in the first quarter. Alphabet was the most active and largest corporate investor in the tech sector in 2017, surpassing international players like both SoftBank Group of Japan and Intel’s Intel Capital.

During the quarter Alphabet reported Monday, one investment, Glassdoor Inc., was sold for $1.2 billion to a Japanese human resources company called Recruit Holdings, while another, the electronic signature company DocuSign had a strong IPO. Two security investments have paid off recently as well, as cloud security firm Evident.io was acquired by Palo Alto Networks and Zscaler went public in the first quarter.

Alphabet’s investments gained more than $3 billion in the first quarter. With the $1 billion-plus disclosed Monday, the total gains for Alphabet’s investments in the first half of the year account for nearly one-third of Google’s GAAP net income figure for that period.

Tuesday, July 24, 2018

A Big Week for Earnings

If you're looking for information on the biggest stocks in the market, this is the week to pay attention. There are 174 S&P 500 index  companies scheduled to report earnings this week, and 11 of the 30 Dow Jones Industrial Average components are on the docket as well.

The most important Internet stocks are all up this week. Facebook reports Wednesday afternoon, Amazon.com is scheduled for Thursday afternoon, and Twitter reports on Friday morning.

We've already had one big Internet blowout: Alphabet, Google's parent, reported yesterday, with revenue of $26.24 billion, up from $20.91 billion in the second quarter of 2017 and higher than the average analyst estimate of $25.58 billion. Its share price jumped by nearly 5 percent in after-hours trading yesterday.

Monday, July 23, 2018

The Importance of Getting Help

How important is it to work with a financial advisor? According to the Northwestern Mutual’s new Planning & Progress Study, 67 percent of Americans who use a financial advisor believe they have clarity on how much to spend now and save for later compared to less than half (44 percent) of those without an advisor.

The survey also finds that individuals without an advisor are more than twice as likely as people with an advisor (34 percent vs 13 percent) to say they are “not at all confident” they have the balance between spending and saving correct. This may be one reason why those without an advisor are more likely than those with an advisor (60 percent vs. 37 percent) to point to debt reduction as a top priority.

The study also finds that a majority (59 percent) of Americans with an advisor believe that, if they work past traditional retirement age, it will be by choice rather than out of necessity. The opposite is true for those without an advisor, with 6 in 10 (61 percent) expecting to remain employed past retirement age out of necessity.

Friday, July 20, 2018

The Race to $1 Trillion

For years now, Apple has been on a relentless push to become the first company to reach $1 trillion in market capitalization. Then Amazon came along. Apple still holds the edge with a market cap of $944 billion, but Amazon, riding another strong showing on Prime Day, just crossed $900 billion for the first time this week, and it seems to have momentum on its side.

Amazon banged out a fresh high on Wednesday and is up more than 50 percent for the year. Meanwhile, Apple hasn’t set a new share price record since June and is up only about 12 percent year-to-date.

To hit $1 trillion in market value, Amazon needs to rally about 13 percent and raises its share price $2,060, while Apple only has to get to $203.45, a 6 percent gain. Amazon reports its earnings next week, while Apple reports on July 31.

Thursday, July 19, 2018

The Beige Book Warns on Tariffs

Ten of the Federal Reserve’s 12 districts reported moderate or modest economic growth so far this summer, the Fed said in its latest roundup of anecdotal information about regional economic conditions known as the Beige Book. But manufacturers across the U.S. expressed concern about tariffs, with many reporting higher prices and supply-chain disruptions in the wake of new trade policies.

In the Philadelphia Fed district, “one machinery manufacturer noted that the effects of the steel tariffs have been chaotic to its supply chain—disrupting planned orders, increasing prices, and prompting some panic buying,” the Beige Book said. The Philadelphia district covers the bottom half of New Jersey.

The New York district, which covers the northern half of our state, reported similar concerns: “A number of manufacturing contacts remarked that tariffs have raised their costs. Moreover, uncertainty about future trade policy was cited as a major concern, particularly in parts of upstate New York, where there is substantial trade with Canada.”

Wednesday, July 18, 2018

The Danger of a Strong Dollar

U.S. corporations are warning that currency fluctuations are weighing on their results, raising a red flag for investors heading into the thick of the second-quarter earnings season. Roughly half of the first 23 S&P 500 firms that posted results for the latest quarter as of Friday said currency swings either had a negative impact on earnings or revenue or were expected to become a headwind in the coming months, according to FactSet.

That makes currency swings by far the most mentioned headwind on earnings calls so far. In comparison, seven firms mentioned the rising cost of raw materials, while five mentioned oil and gas prices and just one cited tariffs.

The strengthening dollar suggests that multinational firms could face an increasingly tough environment in the second half of the year. S&P 500 companies grew their earnings at the fastest pace since 2010 in the first quarter, boosted in part by a depreciating U.S. dollar. A weaker dollar benefits U.S. multinationals by making exports cheaper to foreign buyers, and also by making their overseas profits look bigger when translated back into the U.S. currency.

Tuesday, July 17, 2018

Netflix Stumbles

Netflix has been one of Wall Street's hottest and most-watched stocks in the past 12 months - its share price has risen by about 150 percent over the past year. But it took a hit today when it reported second quarter subscriber numbers that were short of what the analysts were expecting, and the stock is paying for it.

During the quarter, the company added 670,000 domestic streaming subscribers, and 4.47 million international subs. That compares with consensus estimates for 1.2 million and 5.04 million, respectively. The numbers missed those targets as well as Netflix's own forecast for 1.2 million and 5 million domestic and international subscriber additions, respectively.

On the other hand, Netflix beat earnings expectations of 79 cents per share, reporting 85 cents for the quarter. But that wasn't enough to keep the stock from reeling, falling by about 13 percent in after-hours trading last night.

Monday, July 16, 2018

Trying to Get Out of Correction

The U.S. stock market could hit a notable milestone today, but it isn’t one that investors will feel particularly good about. Both the Dow Jones Industrial Average and the S&P 500 index  have been in correction territory since February 8, when concerns that inflation was returning to the economy sparked a sell-off that led to their dropping 10 percent from record levels hit earlier in the year.

Both the Dow and the S&P have been in correction territory for 108 trading days. This matches the longest such stretch since the financial crisis in 2008. Should they stay in correction through today, that will mean they are in their longest such stretch since 1984. In that stretch, it took the S&P 122 days to emerge from correction territory, and the Dow 123 days.

Based on their current levels, the Dow would need to rise about 6.2 percent to hit a new record and exit correction territory. The S&P 500 would need to gain just 2.6 percent to ease the correction.


Friday, July 13, 2018

Retiring in New Jersey

New Jersey is towards the bottom of the pack among the best states to retire in, according to the latest survey from Bankrate.com. Our state ranked 32nd, right in between Pennsylvania and West Virginia.

What's wrong with retiring in New Jersey? On the bright side, the Garden State rates very well on crime (tied for 4th best), health care quality (10th), and culture (11th). It's middle of the pack on weather (24th) and well-being (28th).

But what kills us is that it's expensive to live here. New Jersey ranks 42nd among all the states in cost of living, and dead last in taxes. Bankrate says South Dakota is the best state for retirement, and New York the worst.

Thursday, July 12, 2018

The Sudden Drop in Oil Prices

Oil prices dropped suddenly yesterday for the first time in more than a year, signaling that the recent rally in energy prices may be coming to an end. August West Texas Intermediate crude, the U.S. benchmark, marked its sharpest daily decrease in about 13 months amid fears of flagging demand and renewed production from Libya.

The drop marked the worst percentage decline for oil futures since June of 2017. It was the steepest fall on a dollar basis in nearly three years, since September of 2015.

What made the losses more surprising is that the U.S. oil supply is also dropping, which could be expected to bolster prices. The Energy Information Administration reported yesterday that domestic crude supplies plunged by 12.6 million barrels for the week ended July 6.


Wednesday, July 11, 2018

Why Is Small Business So Optimistic?

Figures out yesterday show that the NFIB Small Business Optimism Index was at 107.2 in June, a tick below below May’s record high but still the sixth highest reading in the index’s 45-year history. The record high for this index is 108.0, reached in 1983.

Reported job creation rose five points, as 63 percent of businesses reported hiring or trying to hire. However, 55 percent reported few or no qualified applicants for the positions they were trying to fill. Twenty-one percent of employers surveyed cited the difficulty of finding qualified workers as their top business problem.

Credit concerns remained historically low, as just 3 percent of owners reported that all their borrowing needs were not met. Only 2 percent of business owners surveyed reported that financing was their top business problem, while 16 percent of survey participants listed taxes as their top business problem.

Tuesday, July 10, 2018

ETFs Continue to Slow

Even though the market remains relatively solid for 2018, exchange-traded funds continue to suffer. U.S.-listed ETFs posted net monthly outflows in June for a third month in 2018, according to the latest U.S. ETF Flash Flow report from State Street Global Advisors.

This is the greatest number of months with outflows in any year since 2008, and we are only halfway through 2018, the report says. If the year has just one more month of net outflows, 2018 would tie the record of four such months, reached a few times in the late nineties.

According to the report, international and emerging market funds have been hurt the worst, registering their largest back-to-back months of outflows since the start of 2016. International equities saw outflows totaling $3.3 and $9.9 billion in May and June, respectively.

Monday, July 9, 2018

The Downside to Low Unemplyoment

As the economy teeters at full employment, rising wages are beginning to eat into the profits of some U.S. companies. That’s good news for U.S. workers, but the steady rise in wages poses a threat to U.S. companies after a streak of double-digit quarterly profit growth that has helped underpin the broader stock market.

Economists at Goldman Sachs predict that every percentage-point increase in labor-cost inflation will drag down S&P 500 earnings by 0.8 percent. In total, labor costs amount to 13 percent of revenue for S&P 500 companies.

The industrials sector is most susceptible to increasing wages, Goldman reports. Those companies have a 21 percent ratio of labor costs to revenue, the most out of the S&P’s 11 sectors. The consumer discretionary sector, the S&P’s best-performing sector this year, is also likely to take a hit if wage growth accelerates.

Friday, July 6, 2018

June's Jobs Report

June was another big month from an employment standpoint, with the economy adding 213,000 new jobs, the Bureau of Labor Statistics said this morning. Job gains have averaged 215,000 per month over the first half of 2018. Nevertheless, the unemployment rate ticked up to 4.0 percent.

U.S. employers have added to payrolls for 93 straight months, extending the longest continuous jobs expansion on record. The BLS report showed professional and business services adding 50,000 jobs in June. Employment also grew in manufacturing, health care and construction. All levels of government added 11,000 jobs last month.

The unemployment rate rose in June from its lowest mark since April 2000 because 601,000 Americans entered the labor force, and not all found jobs. It’s a sign that historically low unemployment may have prompted some of those on the sidelines to start job searches.

Thursday, July 5, 2018

2018's Biggest Winners So Far

With the first half of 2018 now in the books, these are the top 10 best-performing stocks in the entire S&P 500 index for the first six months of the year:

  1. Fossil Group, up 215 percent
  2. ABIOMED, up 114 percent
  3. Netflix, up 95 percent
  4. Twitter, up 80 percent
  5. XL Group, up 62 percent
  6. Tripadvisor, up 60 percent
  7. Under Armour, up 59 percent
  8. Align Technology, up 53 percent
  9. Chipotle Mexican Grill, up 50 percent
  10. Macy's, up 44 percent

Wednesday, July 4, 2018

Thoughts for Independence Day

"Humanity has won its battle. Liberty now has a country." ~Marquis de Lafayette

 "Liberty has never come from the government. Liberty has always come from the subjects of it. The history of liberty is a history of resistance." ~Woodrow Wilson

"For to be free is not merely to cast off one's chains, but to live in a way that respects and enhances the freedom of others." ~Nelson Mandela

Tuesday, July 3, 2018

The Year So Far

It's been a pretty middling year in the markets: Halfway into 2018, the S&P 500 is up less than 2 percent. Moreover,  all of those gains are thanks to a rally in just two sectors: technology and consumer discretionary.

The S&P 500 information technology sector, in fact, accounted for 102 percent of the year-to-date gains as of Friday. Amazon.com, which is in the consumer discretionary sector, has accounted for 34.6 percent of all the gains. Amazon.com has gained more than 45 percent since the start of the year.

Considering market caps, the five largest contributors to the year-to-date gains have been:

  • Amazon.com, up 0.82 percent   
  • Microsoft, up 1.42 percent 
  • Apple, up 1.12 percent 
  • Netflix, up 1.72 percent 
  • Facebook, up 1.56 percent 


Monday, July 2, 2018

Today's the Day

Is today the best trading day of the year? According to the website Marketwatch, the first trading day of July - that's today - is the one day of the year most likely to have a positive return for the S&P 500, which it has done 83.3 percent of the time.

The first half of July tends to be mildly bullish, and often hosts a brief summer rally. Keep in mind, though, that the summer rally tends to be the weakest of all seasonal rallies. Before you get too excited, note that the average return for the S&P on this date is 0.35 percent.

The S&P isn't the only likely winner on this date. The win rate for the Dow Jones Industrial Average  is 77.77 percent, and the win rate for the Nasdaq is 72.22 percent.

Friday, June 29, 2018

How Hot Is GDP?

The U.S. economy is roaring, at least for now. Macroeconomic Advisers, which runs one of the more sophisticated economic forecasting models, is tracking a 5.3 percent growth rate in the second quarter. That would be the fastest pace in almost 15 years.

A narrowing trade deficit, tax cuts coupled with more government spending, a resurgent consumer and decent business investment are all supporting what appears to be a strong rebound in growth. The Atlanta Fed’s GDPNow model shows a 4.5 percent growth rate, although such estimates jump around as new data arrives.

But we’ve seen economic head fakes before—gross domestic product advanced 5.2 percent in the second quarter of 2014 only to quickly revert to the mean. Overall, growth has averaged about 2 percent during the current expansion.

Thursday, June 28, 2018

Does America Have a Retirement Crisis?

Americans are reaching retirement age in worse financial shape than the prior generation, for the first time since Harry Truman was president. A new analysis by the Wall Street Journal shows that Americans verging on retirement have high average debt, are often paying off children’s educations and are dipping into savings to care for aging parents.

This cohort should be on the cusp of their golden years, but their median incomes including Social Security and retirement-fund receipts haven’t risen in years, after having increased steadily from the 1950s. Median personal income of Americans 55 through 69 leveled off after 2000—for the first time since data became available in 1950.

The percentage of families with any debt headed by people 55 or older has risen steadily for more than two decades, to 68 percent in 2016 from 54 percent in 1992, according to the Employee Benefit Research Institute. Americans aged 60 through 69 had about $2 trillion in debt in 2017, an 11 percent increase per capita from 2004.

Wednesday, June 27, 2018

Confusion over Retirement Savings

How much money will you need in retirement? A whopping 61 percent of Americans don’t know how much they’ll need to save to get them through retirement, according to a new survey from Bankrate.

Millennials are the group most in a quandary over how much they’ll need, with 69 percent admitting to such ignorance. But they’re far from the only ones: 56 percent of GenXers (ages 38 to 53), 58 percent of boomers and 59 percent of those aged 73-plus have the same problem.

Among the ones who put forth an estimate of what they'll need in retirement, the median estimate is $650,000. Those who have given estimating a shot are all over the financial map, with 7 percent saying $250,000 to $500,000, and 8 percent saying either $250,000 or less, $500,000 to $1 million or over $1 million, respectively.


Tuesday, June 26, 2018

A Disappointing End to a Dow Streak

A winning streak extending nearly two years for the Dow Jones Industrial Average ended yesterday. The Dow closed sharply lower, falling around 328 points to 24,252.80, below its 200-day moving average, which stood at 24,280.02.

The Dow hadn’t closed below its 200-day moving average for 501 consecutive trading days, going back almost two years exactly to June 27, 2016. That's the point at which the market reacted negatively to the U.K. Brexit vote.

The streak of 501 consecutive trading days above the 200-day moving average is the Dow’s third longest since 1952, when the New York Stock Exchange began its current five-day-a-week trading schedule. The only longer stretches were a 652-day run that ended in May 1956 and a 715-day stretch that ended in October 1987.

Monday, June 25, 2018

Bonus Bonanza

The share of workers’ pay going to bonuses hit the highest level on record this year, reflecting a shift in how employers woo job candidates while still trying to keep a lid on base pay. That's according to a new report out from the Department of Labor.

Private-sector bonuses that aren’t directly tied to a worker’s output reached 2.8 percent of employer pay and benefit costs in the first quarter. That’s the biggest share since the Labor Department started tracking the figure in 2008.

Anecdotally, the trend of bonuses rather than permanent wage increases continues. The most popular measure of annual wage growth has bounced around 1.5 percent to 2.5 percent in recent years, which is below prerecession levels. With a 2.7 percent gain in May, though, it has finally shown signs of picking up as the labor market tightens.

Friday, June 22, 2018

Micro Caps Are on Fire

As we noted yesterday, small-capitalization stocks have been soaring lately. But a subset of even smaller-cap equities has produced even more stellar results this year.

The Russell Microcap Index, which is a benchmark of companies with an average market value of about $730 million, has gained 14 percent so far in 2018, as of Wednesday’s close. That compares with a only slightly less impressive year-to-date gain of 11.1 percent for the Russell 2000 index, which has a roster of companies with an average market value of $2.6 billion.

Both indexes are trading in record territory, with the Russell Microcap having just put in a 24th all-time high close for 2018. That is one more record than the Russell 2000 has set.

Thursday, June 21, 2018

Big and Small Stocks, in Opposite Directions

On the big board, it was a rough day in the stock market yesterday. The Dow Jones Industrial Average closed down 0.2 percent, recording its seventh straight daily loss.

There's much better news down among the smaller stocks. The Russell 2000 Small Cap index made it four positive days in a row yesterday. In the process, it also set an all-time high.

But there are rumblings that the small-cap rally may have run its course. Investors have yanked more than $1 billion from the bellwether iShares Russell 2000 Exchange-Traded Fund since June 11, after pouring money into it for much of this year.

Wednesday, June 20, 2018

The Coming Corporate Bond Wave

The bill is coming due on trillions of dollars in companies’ bonds. As much much as $1.7 trillion of non-financial corporate bonds matures globally this year, and $2 trillion or more could mature in each of the next four years, according to research out this week from McKinsey & Co.

Record amounts of debt are maturing just as interest rates are rising, forcing companies to pay up if they want to refinance their maturing bonds. Credit quality has also been declining as top-rated companies have taken on more debt. Roughly 40 percent of nonfinancial corporate bonds now have triple-B credit ratings, the lowest that’s considered investment grade. That’s up from 22 percent in 1990,

Stock investors are starting to take notice. Shares in companies with strong balance sheets have outperformed those with weak balance sheets by 6.3 percentage points this year. For much of the economic cycle, weak balance sheet companies were the outperformers, as companies were rewarded for adding leverage.

Tuesday, June 19, 2018

Volatility Has Settled Down

After spiking to levels not seen in a couple of years back in March and April, U.S. equity market volatility has really settled back down. Over the last 50 trading days, the S&P 500 has averaged a daily move of just plus or minus 0.56 percent. 

That’s half the daily move we were seeing at peak levels of volatility earlier this year. It’s also 0.14 percent below the bull market’s average daily move of plus or minus 0.70 percent

While volatility has settled down, we’re going to need to see a continued slowdown to get back to the historically low level that investors got used to in 2017.  Back in November 2017, there was a 50-trading day period where the S&P experienced an average daily change of just plus or minus 0.22 percent.

Monday, June 18, 2018

Where MBAs Are Going

If you have a family member graduating from an MBA program this spring, they might be considering going to work for a bank - or they might not. More MBA graduates are choosing jobs in technology and consulting even as banks have been raising starting salaries.

The share of full-time MBA graduates from the top 10 business schools accepting jobs at financial-services firms dropped between 2012 and 2017 from 36 percent to 26 percent. The share accepting jobs in technology rose from 13 percent to 20 percent in the same period. Consulting edged out financial services as the top draw in 2017, as the choice of 29 percent of grads, up from 27 percent in 2012.

Banks are trying to do more to attract the top MBAs. For graduates of MIT Sloan School of Management, median starting salaries paid by financial-services firms jumped 25 percent between 2012 and 2017 to $125,000. Tech- and consulting-firm median salaries rose just 9 percent—to $125,000 and $147,000, respectively—over the same period.

Friday, June 15, 2018

Burning a Hole in Our Collective Pockets

Americans are spending a lot of money. Retail sales rose 0.8 percent in May, the government reported yesterday — much better than expected. Spending was up 5.9 percent from a year ago.

And the gains were broad: Spending surged at clothing stores, at restaurants and at home-improvement stores such as Home Depot and Lowe's. In fact, the jump in spending at physical stores in May outpaced what the government calls nonstore retailers, a category that includes Amazon and other online retailers.

With all that spending, the savings rate dipped to 2.8 percent in April, as the rate of consumer spending outpaced the increase in personal income. The savings rate has only been below 3 percent three times since the 2008 financial crisis. It was also lower than 3 percent last November and December, but it rebounded after the holiday shopping season.

Thursday, June 14, 2018

The Fed Hikes Rates

As expected, the Federal Reserve lifted its benchmark federal funds rate by a quarter-percentage point, yesterday, to a range of 1.75 percent to 2 percent. But he biggest news is what it might do over the rest of the year.

By a narrow margin, the Fed projected a total of four rate increases in 2018, instead of three as previously planned. Fed leadership remains closely divided: Eight Fed officials said they expected interest rates to rise at least four times, while seven forecast three rate hikes.

The Fed’s preferred inflation barometer, the PCE index, has already hit the bank’s long-run 2 percent target. Yet the Fed predicts inflation will end up around 2.1 percent by year end, suggesting that they think prices will ease later this year.

Tuesday, June 12, 2018

The Revolving World of Credit Card Debt

Americans repaid $40.3 billion in credit card debt during the first quarter of 2018, according to a new analysis of data from the personal-finance website WalletHub. That’s the second-highest amount paid off in one quarter since the first quarter of 2009, when consumers paid off more than $44 billion.

Now, the bad news: Their debts are not getting that much smaller. Americans ended 2017 with $91.6 billion in new credit-card debt, the largest annual amount since 2007 and 104 percent above the post-recession average. Outstanding credit card debt is at the second-highest point since the end of 2008.

In 2017, Americans hit a record high of $1.021 trillion in outstanding revolving debt (often categorized as credit-card debt). As of April 2018, they still had more $1.030 trillion to pay off, according to the Federal Reserve.

Selling a House Is Easy

In yet another sign of the ultra-competitive housing market buyers now face, the time homes spend on the market has never been shorter since the recession began. The median list-to-sale time, which is the period of time between when a listing is officially posted and when the home is officially sold, is now just 64 days, down from 77 a year ago, according to real-estate website Trulia.

Premium homes take longer to sell, with a median list-to-sale period of 72 days. Starter homes (59 days) and trade-up homes (57 days), on the other hand, sell faster than the average.

It’s the latest sign of a housing market that may be reaching its peak. Median home values increased 8.7 percent on average nationwide from April 2017 to $215,600. That represents the fastest pace of acceleration since June 2006 — right before the start of the housing crisis that triggered the Great Recession — when they rose 9 percent annually.

Monday, June 11, 2018

Those Hot Tech Funds

Where are people investing these days? Technology funds just closed out one of their biggest weeks ever in inflows. According to Bank of America Merrill Lynch, tech funds saw $2.3 billion inflows this week, its second-highest weekly inflows ever.

Tech funds have taken in $17.3 billion so far this year, according to Bank of America analysts. That puts the sector on track for a record year in inflows. 

The other hot investing option? Money market funds, which pulled in nearly $34.9 billion during the seven days through June 6, according to Lipper. One big reason for that: Money fund yields averaged 1.41 percent at the end of May, up from just 0.49 percent a year ago.

Friday, June 8, 2018

Don't Sell in May?

One old maxim for stock market investors has been "Sell in May, then go away." The idea is that the market tends to spend the summer in the doldrums, and then picks back up in the fall.

But that hasn't been true this year. Though the stretch between May and October is typically thought to be weak for the stock market, equities have started off that period on a strong note. The S&P 500 has climbed 4.7 percent since the end of April, the best performance for that stretch since 2009.

The maxim does have some validity. Over the last two decades, the S&P 500 has climbed 0.3 percent on average between May and October, versus 6.5 percent between November and April. But over the last five years, the S&P 500 has actually performed better between between May and October than between November and April.

Thursday, June 7, 2018

The Hot, Hot Job Market

How hot is this economy? The U.S. had more job openings than unemployed Americans this spring. That’s the first time that’s happened since such record-keeping began in 2000.

U.S. job openings rose to a seasonally adjusted 6.7 million at the end of April, a record high. That's also more than the 6.3 million Americans who were unemployed during the month.

The largest number of April openings, 1.3 million, were in the broad business-services sector, which includes everything from accountants and software developers to temporary staffers and clerical workers. There were also ample job openings in lower-paying fields, with 844,000 accommodation and food-service jobs open in April and 735,000 unfilled retail positions.

Wednesday, June 6, 2018

The Wood Surge

One little-discussed trend affecting our economy: Wood prices are up 67 percent over the past year, adding thousands of dollars to the cost of each new house. Meritage Homes Corp. CEO Steven Hilton said recently that higher lumber prices have this year added about $3,000 on average to the cost of each house it builds.

The historic run-up in lumber prices is attributable to a trade dispute with Canada, wildfires and limited rail capacity. This comes as U.S. home builders are already struggling to meet demand amid shortages in buildable lots and labor.

But it's good news for timber companies. Shares of CatchMark Timber Trust, Rayonier and PotlachDeltic have each risen more than 11 percent over the past year. Shares of Weyerhaeuser, the largest private owner of timberland in North America, closed on Tuesday at the highest price in its 118-year history.

Tuesday, June 5, 2018

A Social Security Hike?

Are you on Social Security? If so, you could be in for a sizable raise. The annual Social Security cost-of-living adjustment for 2019 could top 3 percent in 2019, which would be the largest increase in seven years, according to a new estimate released by the Senior Citizens League.

A 3 percent cost-of-living adjustment, or COLA, in 2019 would be the biggest annual hike since 2012, when Social Security benefits grew by 3.6 percent. This year the COLA was 2 percent, following a meager 0.3 percent increase in 2017 and no increase at all in 2016.

The Senior Citizens League's COLA estimate for 2019 is based on consumer price index data through April. Social Security COLAs are based on the increase in the index that measures price inflation for urban workers, from the third quarter of the prior year to the corresponding third quarter of the current year.

Monday, June 4, 2018

Retirement and the Gig Economy

We hear a lot about the gig economy, but for many people, it's just a way to ensure their retirement plan. According to a new survey from the investment firm Betterment, 81 percent of gig economy workers say they are afraid of being to afford to save for retirement.

In fact, a third of those people with side jobs have that second job specifically to save money for retirement. And 49 percent of people aged 55 or older who have a second job are saving for retirement with their side gig.

Many of them plan to continue these side jobs into retirement. The survey found that 12 percent of second-job holders intend to hang on to a side-gig job as their main source of income after retiring from their traditional career, and 20 percent of those with a full-time job plan to take on incremental gigs to provide their main source of income once they’ve “retired.”

Friday, June 1, 2018

May's Jobs Report

More good news for the economy in May, as the economy added 223,000 jobs, and the unemployment rate edged down to 3.8 percent. Since 1969, the only other time unemployment has been this low was in April 2000, in the middle of the dot-com bubble.

The economy has now added an average of 191,000 jobs over the past 12 months. In May, retail trade added 31,000 jobs, and employment in health care rose by 29,000.  Employment in construction added 25,000 jobs and has risen by 286,000 over the past 12 months.

The beleaguered mining sector added 6,000 jobs in May. Since a recent low point in October 2016, employment in mining has grown by 91,000, with support activities for mining accounting for nearly all of the increase.

Thursday, May 31, 2018

Changing GDP

The U.S. grew economy grew a touch softer in the first quarter than originally reported, mainly because of a slower buildup in inventories, the Commerce Department said yesterday. Gross domestic product was trimmed to an annual 2.2 percent pace from the previously reported 2.3 percent.

What happened to change it? There were some positive changes to the first-quarter GDP number: Fixed investment in things like equipment, structures and software was revised higher show a 6.5 percent increase instead of 4.6 percent.

Yet stronger investment was offset by weaker inventory growth. The value of newly added inventories was slashed to $20.2 billion from an originally reported $33.1 billion. The increase in consumer spending was lowered a notch to 1 percent from 1.1 percent. On top of that, exports rose a bit slower at 4.2 percent vs. a preliminary 4.8 percent.

Wednesday, May 30, 2018

Billions for Women

The world's billionaire population increased by 15 percent to 2,754 individuals last year, surpassing the previous peak of 2,473 in 2015, according to Wealth-X, a wealth information and insight business. But maybe the biggest news is the rise of female billionaires.

Last year, the number of female billionaires rose by 18 percent to 321, outpacing the 14.5 percent growth in the male billionaire population. That increased women’s share of the global billionaire population to 11.7 percent.

In addition, Wealth-X noted a steady increase in the number of female billionaires whose net worth can be attributed to both inheritance and self-made wealth creation. According to the census, 56.8 percent of global billionaires are self-made, 13.2 percent inherited their wealth and 30 percent built their fortunes in part on inherited wealth.

Tuesday, May 29, 2018

Retirement Accounts Are Growing

As of the end of the first quarter, the average retirement account balance for workers with both a Fidelity IRA and a Fidelity workplace retirement account, such as a 401(k) or 403(b), is up by 9 percent from the end of the first quarter of 2017. That average balance now stands at $299,600, up substantially from the average balance of $275,700 at the end of the first quarter of 2017.

In addition, 401(k) contribution rates are on the rise, with the total savings rate (including not just employee contributions but also employer matches) hitting a record high of 13.2 percent at the end of the first quarter. That’s up from 13.0 percent in the fourth quarter 2017.

Interestingly, IRA account averages are consistently higher than either 401(k) balances or 403(b) balances at Fidelity. For the first quarter of 2018, Fidelity reported that its average IRA balance stood $105,100; its average 401(k) balance was at $102,900; and its average 403(b) balance was $82,100.

Monday, May 28, 2018

Thoughts for Memorial Day

“Honor to the soldier and sailor everywhere, who bravely bears his country’s cause. Honor, also, to the citizen who cares for his brother in the field and serves, as he best can, the same cause." ~Abraham Lincoln

“Heroes may not be braver than anyone else. They’re just braver five minutes longer." ~Ronald Reagan

"Of all the so-called natural human rights that have ever been invented, liberty is least likely to be cheap and is never free of cost." ~Robert A. Heinlein

Friday, May 25, 2018

The Good News on Student Loans

In this season of graduation, many of us are thinking about student loans. The news in that area is fairly good: The share of new delinquencies on student loans has fallen to its lowest level in more than decade. In the first quarter, slightly over 9 percent of student debt outstanding was newly delinquent, based on figures from the Federal Reserve Bank of New York.

In the first quarter, 10.7 percent of overall student-loan debt was considered delinquent, meaning a payment hadn’t been made on the debt in at least 90 days. This figure marked the smallest share of student-loan borrowers in serious delinquency since 2012.

During the recession, delinquencies across categories of debt--including auto loans and credit-card debt--spiked. Around 2011, debt delinquencies reversed course, except for student-loan delinquencies, which rose through 2012 and remained at an elevated level for several years. The student-loan delinquency rate is still far higher than rates for any other type of consumer debt.

Thursday, May 24, 2018

Another Rate Hike Seems Likely

Federal Reserve officials in their meeting in early May confirmed they planned to raise interest rates in June and were not concerned they were behind the curve on inflation. That was the primary takeaway from that meeting, whose minutes were released to the public yesterday afternoon.

“Most participants judged that if incoming information broadly confirmed their economic outlook, it would likely soon be appropriate for the FOMC to take another step in removing policy accommodation,” the minutes said. Traders in the federal funds futures market see more than a 90 percent chance of a June rate hike.

Although inflation hit the Fed’s 2 percent target in the latest reading for March, for the first time in a year, officials were not convinced it would remain there for long. “It was noted that it was premature to conclude that inflation would remain at levels around 2 percent, especially after several years in which inflation had persistently run below the Fed’s 2 percent objective,” the minutes said. Only a “few” officials thought inflation might move “slightly” above the 2 percent target.

Wednesday, May 23, 2018

A Big Quarter for Banks

Bank profits soared by 28 percent during the first quarter of 2018 to $56 billion, according to statistics published this week by the FDIC. The blockbuster earnings report easily tops the prior record set just three quarters earlier.

The FDIC said that 70 percent of the nation's 5,606 banks grew their bottom line during the last quarter. The percentage of money-losing banks dropped to just 3.9 percent. The FDIC's list of problem banks fell to just 92, the lowest that figure has been since the first quarter of 2008.

The financial industry owes a chunk of the mega earnings to the corporate tax cut passed at the end of last year. The FDIC said the tax law boosted bank profits by about $6.7 billion. However, banks would have still made a record $49.4 billion without the tax cuts.

Tuesday, May 22, 2018

Fortune's Top Ten

We are often in the habit of looking at America's biggest companies in terms of their market capitalization, but Fortune's venerable Fortune 500 list ranks corporations in terms of their revenues. That pushes the tech giants like Apple and Facebook down the list, in favor of the likes of Walmart, which is a clear No. 1 in this ranking. The top ten, with their 2017 revenues in millions:

  1. Walmart $500,343
  2. Exxon Mobil $244,363
  3. Berkshire Hathaway $242,137
  4. Apple $229,234
  5. UnitedHealth Group $201,159
  6. McKesson $198,533
  7. CVS Health $184,765
  8. Amazon.com $177,866
  9. AT&T $160,546
  10. General Motors $157,311
The least familiar name on that list is McKesson. What did they do to make $200 billion last year? McKesson sells medical supplies, pharmaceuticals, and other forms of medical technology.


Monday, May 21, 2018

What We Wish We'd Done

Regrets? We've had a few. A new survey from Bankrate.com finds that not only do Americans have financial regrets, but they continue to procrastinate in addressing the issue, whatever it may be.

While the largest percentage of respondents, at 39 percent, say their biggest financial regret is not saving enough, the next largest, at 18 percent, say they wish they’d started saving for retirement earlier. Fourteen percent regret not saving enough for emergency expenses, and seven percent would have liked to have saved more for the kids’ education.

A whopping 49 percent of those who do have a regret say that they haven’t started to tackle it. Some plan to put it off indefinitely, with 25 percent saying they have no plans to address it; 19 percent think they’ll get around to it in the next year, while six percent say it will take them more than a year.


Friday, May 18, 2018

Sometimes You Have to Wait

More than one-third of Americans (35%) were forced to delay a major life decision in the last year because of finances, according to a new survey by the American Institute of Certified Public Accountants. That may sound like a lot, but it's actually a drop from the 51% who did so in 2015.

What are people delaying?

  • 14% of Americans waited to buy a home, compared to 22% in 2015.
  • 13% of Americans put off higher education, compared to 24% in 2015.
  • 12% of Americans put off a medical procedure, compared to 19% in 2015.
  • 10% delayed retirement, compared to 18% in 2015.
  • 7% delayed having children, compared to 13% in 2015.
  • 6% of people put off marriage, compared to 12% in 2015.


Thursday, May 17, 2018

What It Means to Be Wealthy

Charles Schwab has just come out with its annual Wealth Index. One of the most important questions it asks: What is the net worth an American needs to be “wealthy”? The answer: an average of $2.4 million, the same as last year, in the online survey of 1,000 Americans between age 21 and 75.

To be "financially comfortable" in America today isn't quite as difficult. That requires an average of $1.4 million, up from $1.2 million a year ago, according to the survey.

The survey also asked what made respondents feel “wealthy” in their daily lives. Spending time with family was most commonly cited, at 62 percent overall, followed by “taking time for myself,” which came in at 55 percent.

Wednesday, May 16, 2018

Fund Managers Still Bullish

Many fund managers remain bullish about U.S. stocks, with most of them thinking the market’s recent rally still has further to run. Just 19 percent of investors think January's peak represented the top of a bull run that began nine years ago, according to Bank of America Merrill Lynch’s monthly survey of fund managers.

Three-quarters (76 percent) of the fund managers surveyed thought equities would keep climbing. Almost half of them said stocks would remain strong until 2019 or beyond.

Although U.S. equities have recovered some over the past two weeks, the S&P 500 remains more than 5 percent off its January high. The index hasn't notched a record close since January 26, before a sudden burst of volatility rattled world markets.

Tuesday, May 15, 2018

Congratulations, and Welcome Home

Is someone in your family graduating from college this spring? More graduates are walking across the stage to pick up their diplomas—and then walking right back home to mom and dad’s house. The share of recent graduates moving back into their parents’ homes jumped to 28 percent in 2016 from 19 percent in 2005. 

The trend is most pronounced in areas particularly affected by the housing bubble of the late 2000s. Those areas include Las Vegas and Riverside, California, according to real estate site Zillow’s recent analysis of U.S. Census data, as well as perennially expensive cities like New York City.

In fact, New York had the second highest share of college graduates living with mom and dad in 2016 of any city in the nation, with 42 percent. Only Miami, which had 45 percent of grads living with their parents, was higher.

Monday, May 14, 2018

The Final Numbers on the Equifax Scandal

Last week, in a filing to the SEC, the credit-rating agency Equifax offered its most detailed analysis of its massive breach to date. The company disclosed not only how many consumers it believes were hit but also  broke down which types of information were most likely to have been stolen.

In the end, 147 million people were affected. Names, dates of birth and Social Security numbers were by far the most common type of data stolen by the attackers, Equifax said. Then came mailing addresses, phone numbers and just under 2 million email addresses. Roughly 209,000 credit card numbers and card-expiration dates were taken.

Beyond the information stored in those databases, Equifax said the hackers accessed thousands of images of official documents — such as government-issued IDs — that people had uploaded to the company to prove their identity. Photos of as many as 38,000 driver's licenses and 12,000 Social Security or taxpayer ID cards were accessed.

Friday, May 11, 2018

The Latest on Inflation

The Consumer Price Index rose 0.2 percent in April, with increases in the cost of gasoline and rents being offset by a drop in motor vehicle prices, the Labor Department said yesterday. In the 12 months through April, the CPI increased 2.5 percent, the biggest gain since February 2017. That followed a 2.4 percent rise in the 12 months to March.

Excluding the volatile food and energy components, the CPI edged up just 0.1 percent in April. That follows on the heels of two successive monthly increases of 0.2 percent.

Services prices excluding energy rose 2.9 percent in the year through April, but much of that was due to a rise in housing costs. If you also remove rents from that equation, overall services prices were up just 2.3 percent.

Thursday, May 10, 2018

The World Slows Down

Investors bought just $533 million in world equity mutual funds and exchange-traded funds, which invest primarily in international stocks, in the week ended May 2. That was the slowest weekly pace for this category since January 2017, according to the Investment Company Institute.

After surging to $43 billion in January, monthly inflows into world equity funds slowed to an estimated $8 billion in April. That's the lowest level for that figure since December 2016.

One reason for this is that growth abroad appears to be slowing. Data from European factory orders to European inflation readings have been missing forecasts lately. In the Citigroup Economic Surprise Index, a broad measure of how expectations for economic data are being met, the eurozone index has dropped to its lowest level since September 2011.

Wednesday, May 9, 2018

The Federal Government Rakes It In

Record tax receipts will lead to April having the largest-ever monthly budget surplus for the federal government, according to the nonpartisan Congressional Budget Office. The April surplus will total $218 billion, breaking the prior record of nearly $190 billion set in April 2001.

Greater-than-expected tax receipts drove the surplus. The record $515 billion in receipts for the month was as much as $40 billion more than the agency estimated about a month ago. The prior record for receipts had been $472 billion in April 2015.

The expected April surplus, meanwhile, isn’t keeping the U.S. from running a wider budget deficit for the fiscal year to date. For the first seven months of the budget year, the shortfall totals $382 billion, or $37 billion more than the same period a year ago, CBO estimates. The CBO recently estimated the full-year deficit would be $804 billion, and that trillion-dollar deficits would return in 2020.

Tuesday, May 8, 2018

Why Oil Prices Are Rising

In recent months, oil prices have risen to levels not seen in three and a half years, since a global glut of crude sent energy markets into a tailspin in 2014. Yesterday, the benchmark oil price reached $70 a barrel for the first time since November 2014.

Why has this happened? The biggest reason is that OPEC and other major oil producers, including Russia, agreed to cut crude production by roughly 1.8 million barrels a day from late 2016 levels in an effort to eliminate a longstanding glut of global supplies. OPEC’s crude production in April fell for a third straight month to a one-year low.

Another reason: Growing demand for oil. The International Energy Agency forecasts global oil demand at 99.3 million barrels a day this year, up from 97.8 million barrels a day in 2017.

Monday, May 7, 2018

Retirees Are Staying Put

As the health and wealth of retirees have increased, more are choosing to stay in or near their homes and neighborhoods rather than moving to a lower-tax state or cheaper, more rural areas within their states. That's according to a new study from United Income, called "The State of Retirees: How Longer Lives Have Changed Retirement."

Nearly half of retirees are now living in the suburbs of cities, and their numbers have increased by almost 40 percent over the past 40 years. The share of retirees who say they have moved in the past five years has fallen from a high of 23 percent in 1980 to a low of 15 percent in 2015, the most recent data available, and only 1 percent report moving out of state, according to the study.

Three of the five states with the largest populations of retirees — California, New York and Pennsylvania — are among the states with the highest taxes. Indeed, the share of Californians who are seniors has climbed from 7 percent in 1965 to 11 percent currently. Low-tax Texas and Florida round out the five states with the largest senior populations.

Friday, May 4, 2018

April's Jobs Report

After spending six months at exactly 4.1 percent, the unemployment rate dropped to 3.9 percent in April, the Bureau of Labor Statistics reported this morning. That's the lowest the unemployment rate has been since December 2000. The economy added 164,000 jobs for the month.

The headline figure fell despite the fact that the number of new jobs added was slightly lower than we've been used to. April's figure compared with an average monthly gain of 191,000 over the prior 12 months. Job gains have averaged 208,000 over the last three months.

The biggest driver of job gains last month was professional and business services, which added 54,000 positions. Over the past 12 months, the industry has added 518,000 jobs. Employment in manufacturing increased by 24,000 in April; manufacturing employment has risen by 245,000 over the year, with about three-fourths of the growth in durable goods industries.

Thursday, May 3, 2018

The Biggest Retirement Worry

Retirees’ overall confidence in their ability to continue to cover basic expenses is on the decline, according to the latest Employee Benefit Research Institute’s Retirement Confidence Survey. One major problem:  More than four in 10 retirees report that their health care expenses are higher in retirement than they planned for.

More than any other category of expenses, health care costs have taken retirees by surprise. The 44 percent that say health care costs are higher than they planned for compares to 26 percent who said housing costs are higher than they planned for. And 27 percent said their overall expenses are higher than planned for.

Retiree confidence tends to track with the economy’s performance. In 2009, as the economy was climbing out of recession, only 20 percent said they were very confident in their ability to survive retirement comfortably. The number peaked in 2016 at 39 percent. But this year, despite a strong economy, the number of very confident retirees has dropped back to 32 percent.

Wednesday, May 2, 2018

Apple's Big Day

The world's biggest stock outdid itself yesterday. Apple announced its earnings per share at $2.73 versus the analysts' expectations of $2.67. The company's net income for the first quarter was $13.82 billion, up from $11.03 billion a year ago.

Apple has often faced low expectations and managed to surpass them. Apple's earnings-per-share results have now beaten the Wall Street consensus in 20 of the past 21 quarters.

But the ploy worked: Apple's stock price rose as much 5 percent after hours, as investors digested the company's better-than-expected outlook. The company also announced a plan to return $100 billion to shareholders in a massive stock buyback.

Tuesday, May 1, 2018

Sell in May?

There's an old stock market adage to the tune of "Sell in May and go away." There's a bit of truth to this, since returns are lower on average for the period of May through October, versus November through April.

But some experts think this year might not hew to tradition. The S&P 500 is flattish year-to-date after a wild ride higher at the beginning of the year, with a lot of volatility in between. After some down days in April, some pundits are seeing an upside correction coming in May.

While the S&P 500's total return in the May-through-October period has averaged just 1.2 percent in the past 20 years, it has nevertheless finished higher 70 percent of the time. During the November-to-April period, by contrast, the S&P was up 85 percent of the time, averaging a 6.2 percent total return.

Monday, April 30, 2018

First Quarter GDP

Gross domestic product expanded at an annual rate of 2.3 percent for the months January through March, the Commerce Department reported Friday. That marked a slight slowdown from the 3 percent growth rate registered during the final three quarters of 2017.

One key area of growth: Nonresidential fixed investment, reflecting business investment in buildings, equipment, software and more, grew at a 6.1 percent rate. That was faster than this category's average growth rate of 4.6 percent during the economic expansion.

Household spending increased at a 1.1 percent rate in the first quarter, pulling back from the fourth quarter, when it rose at a 4.0 percent rate on strong holiday spending. The saving rate rose from the fourth quarter to the first, meaning households pocketed added disposable income from tax cuts rather than spending it.

Thursday, April 26, 2018

The American Dream on the Rise

One economic trend that continues to grow: More Americans own their own homes, and fewer of them are renting. According to U.S. Census data released yesterday, the homeownership rate rose from the prior year for the fifth consecutive quarter in 2018.

The homeownership rate is now at 64.2 percent, its highest level since 2014. The share of Americans who own a home rose from 63.6 percent in the first quarter of 2017.

Last year, surprisingly enough, the homeownership rate rose for the first time in 13 years. The U.S. added 1.3 million owner households over the last year - and lost 286,000 renter households. That marked the fourth consecutive quarter in which the number of renter households declined from the same quarter a year earlier.

The Unlikely Growth in Checking Accounts

Where have you been putting your money lately? One unlikely savings vehicle that's been growing lately is the checking account. The average checking account customer today has more than $3,700 stashed away.

That's well above the recent averages: The median amount held in checking accounts since 1991 is $2,263. In 2007, when times were good just before the Great Recession, consumers had on average less than $1,000 in their account.

Since 2008, apparently due to fear of riskier investments, the checking account customer has been hoarding more money. Moebs Services, an economic-research firm, found that the average consumer checking balance has increased in 23 of the past 30 quarters.

Wednesday, April 25, 2018

The Ten-Year at 3 Percent

The big news on Wall Street yesterday was that the ten-year Treasury bill reached 3 percent, for the first tim ein more than four years. How might this affect you?

The ten-year note is the benchmark for longer-term lending. The rate on a 30-year mortgage, for example, tends to move in relation to the 10-year yield. Freddie Mac said last week that the average rate on a 30-year, fixed-rate mortgage was 4.47 percent, up from 3.99 percent at the end of last year.

The long-term effect on stocks results from the fact that higher yields mean that companies have to pay more to borrow. If rates go high enough, rising borrowing costs can weigh on stock prices because companies need to pay more to service their debt, something that can erode financial performance.

Tuesday, April 24, 2018

Young People in Need of Financial Advice

What's the hottest benefit being offered by employers to young people? It's financial wellness plans. More than a few Generation Zers just entering the workforce are stressed about making ends meet, and many would like their employers to help them better manage their finances, according to a new report from LifeWorks.

A whopping 84 percent of Gen Zers, defined as those under the age of 23, agree it’s important that employers offer financial wellness programs.  But less than half (40 percent) of respondents can’t say their employer cares about their financial wellness and helps them manage it.

Their most pressing obstacles include cost of living, 58 percent; student loan debt, 41 percent; taxes, 34 percent; poor spending habits, 33 percent; and credit card debt, 29 percent. When they face unexpected expenses, 31 percent resort to using credit cards, which suggests that Gen Zers don’t have enough to cover the cost of emergencies.

Sunday, April 22, 2018

This Week in Earnings

This will be a big week for earnings reports, with three of the market's most widely watched stocks set to report. Alphabet, Google's parent company, reports today, Facebook reports on Wednesday, and Amazon reports on Thursday.

  • On average, analysts polled by FactSet expect first-quarter earnings for Facebook of $1.35 a share. Of the 45 sell-side analysts who cover Facebook, the average price target is $216, up from Friday’s closing price of $166.
  • Those analysts expect earnings of $9.28 a share and adjusted earnings of $11.75 for Alphabet. Most people are watching to see how Alphabet's stake in Uber affects its value.
  • Expectations are also high for Amazon, which just reported in its annual shareholder letter that it has more Prime members than Costco. Analysts are looking for Amazon to report revenue growth on average of about 40 percent in its first quarter on Thursday. 

Friday, April 20, 2018

Bullish Sentiment Grows

Despite all the ups and downs in the markets the past few months, individual investors are feeling more positive these days. According to this week's AAII Sentiment Survey, 37.8 percent of investors describe themselves as bullish, meaning they expect prices will be higher six months in the future.

The reading represents an eight-week high, and a jump of 11.7 percentage points from the previous week, although it is still below the long-term average of 38.5 percent. Pessimism fell by 13.5 percentage points to 29.2 percent in the latest week, dropping below its long-term average of 30.5 percent for the first time in four weeks.

The optimism and pessimism gauges have been extremely volatile of late, seeing steep swings on a near-weekly basis. Last week, the number of bearish investors hit its highest level since March 2017.

Thursday, April 19, 2018

Taxes in New Jersey

Now that you've made it through Tax Day, here's a sobering fact to keep in mind: Residents of New Jersey pay the fifth-most federal taxes among the 50 states. The average American adult pays $6,151 per year in federal taxes, but filers here in New Jersey pay $8,835.

The average income per capita in the Garden State is $53,534, which means that the average adult has a tax liability of 16.5 percent. It's slightly worse in New York, where the average adult pays $8,850, for an average tax liability of 17.4 percent.

But that's not the worst in the nation. That distinction belongs to the state of Connecticut, with an average payment of $10,861 and an average tax liability of 18 percent.

Wednesday, April 18, 2018

Companies and Their Cash

American companies are awash in cash: S&P 500 companies, excluding financials, had $2.39 trillion in cash and investments in 2017, according to JPMorgan Chase & Co. researchers. That’s up from $2.2 trillion in 2016 and $1.75 trillion in 2010.

What are they going to do with all that cash? A lot of it could go towards stock buybacks, as companies figure out what to do with their fatter profits and bring back overseas money as a result of the recent tax-code overhaul. That would be good news for a market that has struggled to break even this year.

Based on the amount of buybacks already announced this year by S&P 500 companies, JPMorgan analysts project roughly $800 billion in total buybacks in 2018. That would be up significantly from $530 billion last year.

Tuesday, April 17, 2018

Retail Bounces Back Strong in March

U.S. retail sales rebounded in March after three straight monthly declines as households boosted purchases of motor vehicles and other big-ticket items, suggesting consumer spending was heading into the second quarter with some momentum. The Commerce Department said yesterday that retail sales increased 0.6 percent last month after an 0.1 percent dip in February.

The biggest winners: Auto dealers posted their best month since last September, with sales rising 2 percent. Sales fell 0.3 percent at gas stations, but they were up 9.7 percent from March 2017.

Sales also rose at grocery stores, restaurants and bars, and drug stores. They fell at home and garden stores, clothing shops and sporting goods stores.

Monday, April 16, 2018

Tax Day Facts

Some numbers to keep in mind on this Tax Day:

  • $1.72 trillion: The amount the IRS expects to collect this year
  • $406 billion: The gap between what the IRS estimates people owe and what they collect
  • 155 million: The number of returns Americans are expected to file
  • 70 percent: The number of filers who get a refund
  • $2,925: The average amount of that refund
  • 8.1 billion hours: The amount of time Americans spend working on taxes
  • 1.1 million: Number of tax returns audited by the IRS each year
  • 0.6 percent: The chances that you personally will be audited

Friday, April 13, 2018

Hints of Inflation

At their meeting last month, Federal Reserve policy makers said they’re increasingly confident inflation will rise to their 2 percent target. That's according to the minutes from the March 20-21 meeting that came out this week, which highlight just how much Fed officials’ outlook has changed since last fall, when surprisingly slow inflation raised questions about the need for continued rate increases.

In some senses, we're already there. During the first quarter of this year, consumer prices rose at an annual rate of 2.5 percent, while core prices (which exclude volatile food and energy) climbed at a rate of 2.9 percent.

The Fed’s preferred inflation gauge, the personal consumption expenditure price index, tends to run a little cooler than CPI; it was at 1.8 percent at its least reading in February. But the trend is clear: Underlying inflation is picking up.

Thursday, April 12, 2018

Cash Is on Top - for Now

A new study out from Pension Partners LLC points out that the best place for investors to be in the first quarter of this year was cash. Both bonds and stocks declined over the first three months, which means  that three-month Treasury bills outperformed both U.S. equities and long-dated Treasury bonds, returning 0.3 percent.

The fear among investors is that this trend will continue, but historically, it is relatively rare for cash to outperform both bonds and stocks. Pension Partners analyzed annual returns of the S&P 500, 10-year Treasury notes and three-month Treasury bill going back to 1928. Over that stretch, there were only 12 calendar years in which cash was the top performer.

And in longer time frames than a year, there are basically no scenarios in which cash is the optimal investment choice. Pension Partners notes that as investors increased their holding period from 1 year to 30 years, the odds of cash being king declines from 13 percent to 0 percent.