Wednesday, May 22, 2019

Millennials' Financial Woes

Burdened by significant student loan debt and the fact that many of them spent their first working years in the midst of an economic downturn, millennials are already way behind previous generations on a number of key financial metrics. That's according to a recent analysis by the Wall Street Journal.

In 2016, the average net worth of a household headed by those age 18 to 34 was roughly $92,000. In inflation-adjusted dollars, that was 40 percent lower than the worth of young households in 2001, and 20 percent lower than that of young households in 1989.

Similarly, only about a third of millennials owned homes in 2016. That's compared to half of young people in 2001 who owned homes,  and just under half of young people in 1989.

Tuesday, May 21, 2019

Who's Moving Into Cash?

Are the superrich getting spooked? Members of Tiger 21, a group of about 700 individuals with at least $10 million to invest, increased their cash holdings by 20 percent in the first quarter, bringing the group’s total allocation to levels not seen since the start of 2013. The move marks Tiger 21’s first cash-raising effort in three years.

The group is backing away from hedge funds, but just slightly. Real estate, still the asset of choice, has steadily fallen out of favor, dropping from a peak of 33 percent in the second quarter of 2017 to the current 26 percent level.

Group members have remained steady their bond holdings. That asset class accounts for 9 percent of their holdings, similar to the fourth quarter of 2018.

Monday, May 20, 2019

The Bank of Mom and Dad

Kids have been borrowing or receiving gifts from parents for years, but a new study by Legal & General, a U.K.-based financial services firm and global investor, has quantified the effect. If the Bank of Mom and Dad were a real lender, the total amount loaned out is estimated to be $47.3 billion, just less than U.S. Bancorp, the fifth-largest bank in the nation.

One in five U.S. homeowners received gifts or loans from family to help them buy their home. The average sum given as a gift or interest-free loan is $39,000 per loan. That helped to support the purchase of $317 billion worth of property across America in 2018.

This amount doesn’t include other loans or gifts given out by Mom and Dad, usually dealing with college. Those loans averaged roughly $41,500 apiece.




Friday, May 17, 2019

Earnings Season's Biggest Surprises

Which companies had the biggest upside surprises in terms of sales this earnings season? According to FactSet, these are the ten stocks whose sales figures outperformed the Wall Street analysts the most:

  • Pioneer Natural Resources, exceeded expectations by 38 percent
  • Fifth Third Bancorp, exceeded expectations by 32 percent
  • HollyFrontier, exceeded expectations by 19 percent
  • Alexandria Real Estate Equities , exceeded expectations by 16 percent
  • Lockheed Martin, exceeded expectations by 14 percent
  • Electronic Arts, exceeded expectations by 14 percent
  • Principal Financial Group, exceeded expectations by 12 percent
  • Anadarko Petroleum, exceeded expectations by 12 percent
  • Vulcan Materials, exceeded expectations by 11 percent
  • Westinghouse Air Brake Technologies, exceeded expectations by 11 percent

Thursday, May 16, 2019

A Surprise in Retail Sales

U.S. retail sales unexpectedly declined in April, the Commerce Department said yesterday. The value of overall sales declined 0.2 percent after a 1.7 percent increase in March that had been the strongest gain since 2017.

Overall consumer spending, which includes spending on services such as haircuts and travel, had jumped in March by the most in nearly a decade, but April was a different story. One example of the turnaround: Sales at automobile dealers fell 1.1 percent after increasing 3.2 percent in the previous month.

Sales at clothing stores fell 0.2 percent in April, and by 1.9 percent at home and garden supply stores. Other down sectors included health and personal care, and electronics and appliances. Categories with increases included general merchandise, food and beverage stores, and restaurants and bars.

Tuesday, May 14, 2019

Victims of the Trade War

The trade war between the U.S. and China means hard times for the markets, especially those companies that do a lot of business with China. The Dow Jones Industrial Average and the S&P 500 Index both fell by 2.4 percent yesterday, while the Nasdaq Composite Index dropped 3.4 percent.

Apple led the Dow decliners with a loss of 5.8 percent, after reporting a 22 percent decline in sales in China for the quarter ended March 30 from a year earlier. Other Dow stocks that lost at least 3.5 percent:

  • Boeing, down 4.9 percent
  • Caterpillar, down 4.6 percent
  • DowDuPont, down 3.9 percent
  • Cisco Systems, down 3.9 percent
  • United Technologies, down 3.8 percent
  • Goldman Sachs, down 3.5 percent

Sunday, May 12, 2019

The Bad News from Uber

Uber's hotly anticipated IPO turned into a bit of a dud on Friday. By one measure, it was the fifth weakest one-day return of a company with a value of at least $10 billion of the past 24 years, according to data from Dealogic.

Uber’s stock closed at $41.57, giving it a valuation of $69.71 billion, which is certainly a very big number. But it also finished Friday's trading down 7.6 percent from its official public debut at $45.

The first-day drop put Uber’s return better than only four other companies that were valued at $10 billion or more. ADT, the security company, raised about $1.5 billion on January of 2018 but saw a first-day slide of 11.5 percent. Genuity, one of the last gasps of the dot-com era, saw its stock slide by 14.5 percent on its first day of trading back in June 2000.

Friday, May 10, 2019

Producer Prices Ease Off

The producer price index increased just 0.2 percent last month,  the Labor Department said yesterday. That's significant because that index had jumped 0.6 percent in March, setting off a few alarm bells. In the 12 months through April, the PPI increased 2.2 percent.

Some big changes between the two months: Wholesale energy prices rose 1.8 percent in April after jumping 5.6 percent in March. Goods prices increased 0.3 percent last month after surging 1.0 percent in March.

The producer-price index is a measure of the prices businesses receive for their goods and services. It measures things such as wholesale food prices, which fell 0.2 percent in April. It can be seen as sort of a precursor to consumer inflation.

Wednesday, May 8, 2019

Are Americans Overconfident About Retirement?

According to the 2019 Retirement Confidence Survey of Americans 25 and older, just out from the Employee Benefit Research Institute, 82 percent of retirees are confident they will have enough money to live comfortably throughout retirement. That’s a sharp rise from 75 percent a year ago and comparable to the highs in 2005 and 2017.

The outlook among those still in the workforce is slightly less rosy. In that group, 67 percent of workers are confident they will have enough money to live comfortably throughout retirement, up from 64 percent a year ago and 60 percent in 2017. That figure is near the peaks of 1999 and 2004.

But should they be so optimistic? The EBRI survey also found that 40 percent of workers said they have less than $25,000 in savings and investments, not counting their home and any traditional pension plans. Another 9 percent had $25,000 to $49,999 and another 9 percent had $50,000 to $99,000. That’s 58 percent who have less than $100,000 saved.

The Long-Term Care Stats

How do you feel about your long-term care? Only around 52 percent of workers said they're at least somewhat confident they'll be able to afford long-term care in retirement, according to a new report from EBRI. Just 15 percent considered themselves "very confident" about their ability to cover this particular expense.

These costs add up fast. Roughly 70 percent of today's retirees will need long-term care at some point in their life, according to the U.S. Department of Health and Human Services, and of those who need it, 20 percent will need it for at least five years. The average cost for a semi-private room in a nursing home is nearly $7,000 per month, according to the U.S. Department of Health and Human Services, and hiring a health aide to come to your home and help with household tasks can run you around $20 per hour.

The key is to address this issue early. For a 55-year-old couple, the average cost for long-term care insurance is around $2,500 per year, according to the American Association for Long-Term Care Insurance. Meanwhile, the average 60-year-old couple can expect to pay around $3,400 per year in premiums.

Tuesday, May 7, 2019

A Day of Sound and Fury

Stock prices opened sharply lower yesterday after President Trump tweeted a vow Sunday to raise tariffs from 10 percent to 25 percent on $200 billion worth of imported Chinese goods. The stocks of companies that trade heavily with China were especially hard hit.

Boeing, the single largest U.S. exporter to China, fell 1.3 percent. Apple, which has also been sensitive to signs of weakness in China, declined 1.5 percent. The Philadelphia chip index slid 1.7 percent, since silicon chipmakers get a sizable portion of their revenue from China.

But before the day was over, the markets came bouncing back. The Dow Jones industrial index was down as much as 471 points, while the S&P 500 traded down 1.2 percent at its lows. The Dow came back to finish the day down just 67 points, while the S&P lost just 0.4 percent.

Monday, May 6, 2019

The Uber IPO

The big business news this week is Uber's IPO, expected to take place on Friday. The ride-hailing giant has indicated an expected price range of $44 to $50 a share, meaning the company could raise up to $9 billion at the high end of that range.

That's slightly less than some of the biggest tech IPOs in recent years. Facebook raised $16 billion through its 2012 offering, while Visa Inc. raised almost $18 billion in 2008. China's Alibaba Group raked in roughly $25 billion in 2014.

Still, that's not too bad for a company that's bleeding red ink.  Uber reported $1 billion in net income last year thanks to the sale of some operations in Russia and Asia, but it posted an operating loss of $3 billion.

Friday, May 3, 2019

April's Unemployment Report

Another strong month for job creation has dropped the unemployment rate to its lowest point in almost 50 years, the Bureau of Labor Statistics reported this morning. April saw a robust 263,000 new hires while the unemployment rate fell to 3.6 percent, the lowest it's been since December 1969.

One reason the headline unemployment figure dropped again was because the number of people counted as being in the labor force dropped.  A sharp decline in the labor force of 490,000 in April brought the labor force participation rate down to 62.8 percent.

Professional and business services led job creation for the month with 76,000 new positions. Construction added 33,000, bringing to 256,000 the total new jobs created in the field over the past year. Health care rose by 27,000 in April, while financial positions increased by 12,000.

Thursday, May 2, 2019

Inflation and the Fed

As expected, the Federal Reserve kept its benchmark interest rate in a range of 2.25 percent to 2.5 percent in a statement yesterday after its two-day meeting. The biggest reason the Fed is staying the course? Low inflation.

Their post-meeting policy statement noted: “On a 12-month basis, overall inflation and inflation for items other than food and energy have declined and are running below 2 percent,” On Monday, data was released showing that core inflation, as measured by the personal consumption expenditure price index, fell to 1.6 percent in March, a 19-month low.

Fed chair Jerome Powell indicated after the meeting that rates are likely to stay right where they are for the foreseeable future. “We do think our policy stance is appropriate right now,” he said. “We don’t see a strong case for moving in either direction.”

Wednesday, May 1, 2019

The Change in May

“Sell in May and go away” is a widely followed stock market saying with some basis in truth. The six months from May to the end of October, as compared against returns in the November-to-April stretch — have on average underperformed. But that record may be changing.

Stocks over the six-month span ending in October have posted comparatively weaker returns in only three of the past five years. Two years ago, in 2017, that stretch offered a gain of more than 8 percent gain, compared with only a 2.8 percent gain from November of 2017 to end of April of 2018.

If this summer outperforms the previous six months, we’re in for some good times. The period from the end of last October through the last day of April produced a return of roughly 8.2 percent, according to FactSet data.

Tuesday, April 30, 2019

The Rise in Internet Crime

How bad is internet crime getting? The FBI’s Internet Crime and Complaint Center received 50,000 more complaints in 2018 (351,936) than in 2017 (301,580), with losses from those complaints amounting to $2.7 billion, a $1.3 billion jump from the $1.4 billion in losses reported in 2017, according to the agency’s new crime report. The most prominent scams:
  • Payroll Diversion Scams: In 2018, the Internet Crime and Complaint Center, received over 100 payroll diversion complaints, resulting in losses of over $100 million. In these scams, criminals target employees through phishing emails designed to capture the employee’s login credentials, and the stolen credentials are then used to redirect their direct deposit information.
  • Extortion Schemes: In 2018, IC3 received over 51,000 complaints – a 242 percent increase over 2017 – about Internet extortion schemes, with losses totaling over $83 million. These schemes typically take the form of ransomware, denial of service attacks, network intrusions, and sextortion.
  • Tech Support Fraud: In 2018, IC3 received over 14,000 complaints related to tech support fraud, resulting in losses of approximately $40 million – an increase of over 160 percent from 2017. The majority of the victims in these schemes were elderly.

Monday, April 29, 2019

First Quarter GDP

A strong economic sign: The U.S. economy expanded at a 3.2 percent annual pace in the first three months of 2019, the government said Friday. This was the first time since 2015 that first-quarter GDP topped 3 percent.

Fueling the stronger GDP growth were stronger inventory building and trade. Exports rose 3.7 percent, while imports dropped by the same amount, leading to a smaller trade deficit.

One unexpected factor was a sharp upturn in state and local government spending. Spending by local governments likely picked up due to the partial federal government shutdown, jumping 3.9 percent after a 1.3 percent drop in the prior three months. This was the fastest gain in three years. The contribution from state and local government spending came largely as a result of highway and road construction.

Thursday, April 25, 2019

Losing Affluence

A sign of how America has changed over the past generation: More than half of Americans who grew up rich no longer think of themselves as rich. That’s according to a recent poll of more than 4,000 Americans by Business Insider.

The survey asked respondents to identify their upbringing and define their current financial situation. Of those who responded, around 36 percent who said they grew up affluent think they're still affluent today. But nearly 60 percent now consider themselves to be in a lower class — about half said they're middle class or upper middle class, while the other half said they're poor or working class.

Similarly, nearly 60 percent of those with an upper middle class upbringing now identify with a lower class. Half of this group think they're middle class, while the remaining half think they're poor or working class. Around 34 percent of those brought up upper middle class think their station has remained the same - only about 4 percent think they're now affluent.

Americans' Confidence in Retirement Is Surging

The Employee Benefit Research Institute's 29th annual Retirement Confidence Survey has found 82 percent of retirees are confident in their ability to live comfortably throughout retirement. That's up from 75 percent last year, and ties a record for this survey. This year’s survey equals the highs measured in 2005 and 2017.

The percentage of those still working who say they are very confident in their ability to live comfortably throughout retirement reached 23 percent. That level is consistent with what we saw in the late 1990s and early 2000s, prior to the recession.

EBRI also found the age at which Americans expect to retire and when they actually do doesn’t always match up. The median age for retirement is 62, even though many workers think they’ll be working until 65. Sometimes, that's because people can afford to retire - but sometimes it's not voluntary, but rather due to a health or disability problem, or issues with the employer.

Wednesday, April 24, 2019

Behind the New Market Highs

The S&P 500 and Nasdaq closed at record highs yesterday, behind a batch of solid corporate earnings. The Dow Jones Industrial Average is currently less than 1 percent away from its record.

A range of companies reported strong earnings, helping to lead the way to the higher marks, including:
  • Twitter was up 16 percent after reporting user growth well beyond analyst forecasts.
  • United Technologies rose 2.3 percent after the company reported earnings and revenue that beat analyst expectations, while raising expectations for its full-year performance
  • Coke rose 1.7 percent on better-than-expected earnings

Tuesday, April 23, 2019

The Trouble in the IT Sector

This earnings season looks like it might be a rough one for IT. According to FactSet, the information-technology sector of the S&P 500 index is expected to see earnings drop about 10.6 percent from last year. It is one of just three S&P sectors projected to experience a double-digit percentage decline; the entire index is expected to see earnings drop about 3.9 percent.

One reason for this: The S&P 500’s IT sector no longer includes internet companies like Alphabet, Facebook, Twitter and Netflix. They have all been moved into the new communications services sector, which is expected to see earnings fall by 1.3 percent.

Last year’s tax reform is another factor. IBM, for instance, has seen its net income decline by more than 13 percent, thanks in large part to a huge tax benefit it enjoyed in the first quarter of 2018.

Monday, April 22, 2019

Shifts in the Housing Market

The number of applications for homebuyers to get pre-approved for loans jumped to a nine-year high last week, according to Freddie Mac's most recent mortgage survey. That's potentially a sign of a strong spring homebuying season.

At 4.17 percent, the average 30-year mortgage rate remains 30 basis points below what it was a year ago, enticing more homebuyers. But the more recent trend is that these rates have been going up - exactly what you'd expect when there's great demand for them.

That 4.17 percent for the 30-year was up from 4.12 percent the week before, the third straight weekly increase, which we hadn't seen since September. The 15-year fixed-rate mortgage averaged 3.62 percent last week, up two basis points from the week before.

Friday, April 19, 2019

Happy Easter Weekend

Are you spending money to celebrate the holiday this weekend? American consumers are expected to drop $18.11 billion on Easter, according to the National Retail Federation. Eighty-seven percent of Easter shoppers are expected to buy candy, spending $2.49 billion. Consumers are also projected to spend $5.74 billion on food, $3.27 billion on clothing, $2.87 billion on gifts, $1.29 billion on flowers, just over $1 billion on decorations and $780 million on greeting cards.

More than half of consumers (54 percent) plan to cook a holiday meal, while 16 percent will get a meal from a restaurant. Less than half (49 percent) of shoppers will attend church on Easter, and 15 percent will open gifts. Just under a third of consumers are planning an Easter egg hunt for the little ones in their lives.

This year's overall figure is a slight dip from the $18.16 billion projected in 2018. But with nearly 80 percent of survey respondents expected to celebrate, shoppers are projected to spend a little more on average: $151.25 in 2019 vs. $150.05 in 2018.

Thursday, April 18, 2019

The Mystery of Low Volume

Stocks are on the verge of record territory, with the S&P 500 about 15 points away from a new all-time high. So why are stock trading volumes remaining near the lowest levels of 2019?

Monday’s trading session marked the lowest full-day, total composite trading volume—roughly 5.7 billion shares—since September 10, according to Dow Jones Market Data. In fact, Monday’s session saw even less trading than the infamous  holiday-shortened Christmas Eve session’s turnover of 5.79 billion shares.

To take a slightly longer view, the rolling 10-day average of total composite volumes is now at its lowest since September 12. Trading volume is on pace for its lowest monthly average since last August, and the average volume for April, if it holds, would represent the worst April since 2013.

Wednesday, April 17, 2019

Boomers Fighting Retirement

It should be no surprise to find that boomers are still not ready for retirement, despite the fact that 47 percent of them are now retired. In fact, according to the “Boomer Expectations for Retirement 2019” study from the Insured Retirement Institute, 45 percent of the boomers have no retirement savings.

About 34 million boomers have already retired. U.S. Census data indicate that by 2030, when all boomers will have hit the traditional retirement age of 65, one out of every five people in the U.S. will be of retirement age. But this group is fighting hard against retirement.

Among the study’s findings are that a third of boomers intend not to retire till age 70, if then. A third of boomers ages 67 to 72 have already postponed retirement. Only 23 percent of boomers ages 56 to 61 expect income from a private company pension plan.

Tuesday, April 16, 2019

The End of Tax Season

Tax season ended yesterday, with the traditional April 15 deadline to file. Even though the tax code was changed this year, U.S. taxpayers’ 2018 tax liability was largely on par with their expectations, according to a study released yesterday by Janus Henderson Investors.

Asked in late March about the amounts they paid throughout the year and any outstanding liability or refund, 32 percent of the study participants said they had expected to pay more than they had in 2017. But only 30 percent actually incurred a larger tax bill than in the previous year.

The situation was a little different among the more affluent. Among respondents making $100,000 or more, 42 percent ended up paying more in 2018, whereas only 36 percent expected a larger bill. At the same time, 19 percent of these wealthier taxpayers paid less in 2018 - but 28 percent had expected their liability to be lower.

Monday, April 15, 2019

Fear Strikes Out

With the markets continuing to soar, the CBOE Volatility Index, better known as the Fear Index,  touched its lowest level in six months on Friday. The index hit an intrasession low at 11.95 on Friday, marking the lowest it had been since October 3.

The Fear Index spiked above 36 back in December amid a brutal selloff at the end of 2018, culminating on Christmas Eve. But since that point, it has declined by a whopping 67 percent.

It's not surprising that the Fear Index generally declines when the markets are doing well. The recent dip comes  as the Dow Jones Industrial Average, the S&P 500 index and the Nasdaq Composite Index are on the verge of setting all-time record highs.

Friday, April 12, 2019

Good Tax News for New Jersey

This is the first tax season since the 2017 Tax Cuts and Jobs Act went into effect. Tax liabilities have gone down all across the nation, but guess which state saw the biggest cut? New Jersey!

The Garden State's taxpayers saw an average 29.1 percent decline in tax liabilities through March 31, according to H&R Block. That amounts to $1,972 less in taxes.

But even though Americans are getting taxed about 25 percent less, on average, their refunds are up only by 1.4 percent on average. In New Jersey, refunds have actually declined by $179. H&R Block said the answer, at least for its clients, lies in the fact that many people failed to update their withholding rates after the tax code was overhauled.

Thursday, April 11, 2019

What's Fueling Inflation

The Consumer Price Index rose 0.4 percent in March, boosted by increases in the costs of food, gasoline and rents, the Labor Department said yesterday. That was the biggest monthly increase since January 2018 and followed a 0.2 percent gain in February.

But overall, the inflation picture remains muted. In the 12 months through March, the CPI increased 1.9 percent. The CPI gained 1.5 percent in the 12 months through February, which was the smallest rise since September 2016.

What's rising? Food prices gained 0.3 percent in March after rising 0.4 percent in February. Health-care costs were up 0.3 percent after slipping 0.2 percent in February. Apparel prices fell 1.9 percent, the biggest drop since January 1949, after two straight monthly gains. There were also decreases in the price of used motor vehicles and trucks, airline fares and motor vehicle insurance.

Wednesday, April 10, 2019

A Warning on Oil Prices

Don’t look now, but U.S. oil prices have spiked 50 percent since plummeting to $42.53 a barrel on Christmas Eve. What’s odd about this price rise is that the U.S. is experiencing a boom in oil production: America pumped a record 10.96 million barrels per crude a day in 2018, up by 17 percent from the year before, according to the US Energy Information Administration.

Nevertheless, trouble in the OPEC nations has helped send U.S. oil prices climbing back above $64 a barrel. Brent crude, the global benchmark, is already above $71 a barrel for the first time since mid-November.

We’re starting to see the effects at the gas pump. A survey of more than 5,000 gas stations conducted by AAA shows that the average price for a gallon of regular gas is now $2.75, up 11 percent in the last month. And the average price is already above $3 a gallon in six western states: California, Hawaii, Washington, Oregon, Nevada and Alaska.

Tuesday, April 9, 2019

The Equity Outflow Puzzle

U.S. stocks at the end of March posted their best quarter in nearly a decade, but they did so without help from investors in U.S. stock mutual funds and exchange-traded funds. For the quarter, the S&P 500 rose 14 percent, and has added another 1.9 percent so far this month.

But individual investors seem to be leaving the stock market. U.S. equity funds posted outflows of $39.1 billion in the first quarter, according to a Bank of America analysis of EPFR data. So why do prices keep going up?

The divergence between outflows and outsize gains can be partly explained by corporate buybacks, as S&P 500 firms have repurchased $227 billion of their own stock in the first quarter of 2019, according to FactSet data. That's up from $143 billion in the first quarter of 2018. But that can't account for all of this year’s rally, which has seen the total market capitalization of the S&P 500 rise by $2.96 trillion.

Monday, April 8, 2019

Tough to Max Out That 401(k)

The current annual limits on 401(k) contributions are $19,000, with an additional $6,000 for those 50 and older to make in catch-up contributions. That might not seem like such a hard target to reach, but only a fraction of investors actually accomplish it, according to a report from Vanguard.

Only 13 percent of participants maxed out their 401(k) contributions in 2017, when the limit was $18,000, Vanguard says. For comparison, 9.1 percent of workers whose 401(k) plans are managed by Fidelity Investments reached the cap, up slightly from 9 percent at the end of 2017 and 8.1 percent at the end of 2013.

Boomers were most likely to max out their 401(k) plans, followed by Generation X, and lastly millennials. Unsurprisingly, these investors had higher incomes, were older and had longer tenure at their employers.

Friday, April 5, 2019

March's Jobs Report

After a disappointing February, the employment picture bounced back strong in March, according to figures out this morning from the Bureau of Labor Statistics. The economy added 196,000 jobs last month, after adding just 33,000 jobs in February. The headline unemployment figure was unchanged at 3.8 percent.

Even after February's down figure, the average monthly jobs gain in 2019 stands at 180,000. That's very solid, and not too far off the pace of 2018's numbers, when the economy averaged 233,000 new jobs per month for the entire year.

For March, the health care sector led the way with 49,000 new jobs. Professional and technical services added 34,000, food and drinking establishments added 27,000, and construction added 16,000. The one disappointment: Manufacturing, which lost 6,000 jobs.

Thursday, April 4, 2019

The Latest Economic Indicators

Some good economic news: U.S. manufacturing activity rebounded more than expected in March, according to an industry report released this week, as production, new orders and hiring all picked up. The Institute for Supply Management (ISM) said its index of national factory activity rose to 55.3 from 54.2 in February, which had marked the lowest level since November 2016.

U.S. construction spending is also up. It increased for a third straight month in February, the Commerce Department said, rising 1.0 percent to a nine-month high after an upwardly revised 2.5 percent surge in January.

The one soft spot for the economy? The service sector. Growth in the U.S. services sector hit its slowest pace in more than a year, according to data from the ISM released yesterday. The ISM non-manufacturing index fell to 56.1 in March, the weakest it's been since August 2017, down from 59.7 in February.

Wednesday, April 3, 2019

Happy April!

Now that we have embarked upon another April, it's good to know that this has been the kindest month for stocks over the past 20 years. Since 1999, the S&P 500 has risen 1.7 percent on average during the month of April, according to LPL Financial.

The S&P 500 has closed up in April for 12 out of the past 13 years. The Dow Jones Industrial Average has done even better - it has closed up in April for every one of the last 13 years.

Another reason to be optimistic: Since 1949, the S&P 500 has never finished in negative territory following a first-quarter gain of more than 5.4 percent, which has happened 21 times. In only two of these 21 years have the subsequent nine months of the year provided negative returns: in 1987 and 1956.

Tuesday, April 2, 2019

The World's Most Profitable Company

Saudi Arabia’s national oil company was the most profitable company on the planet in 2018, according to a new report. Citing data from Fitch Ratings, Bloomberg News reported that Saudi Arabian Oil Co. — known as Aramco — generated a whopping $224 billion last year, before interest, tax and depreciation.

Apple Inc.was a distant second, with $82 billion in 2018 profits. The next four on the list are all familiar names:

  • Samsung Electronics 
  • Royal Dutch Shell  
  • Alphabet Inc. 
  • Exxon Mobil 

Monday, April 1, 2019

A Strong First Quarter

The first quarter of 2019 is now in the books, and it was a very strong one for the markets. The S&P 500 rose 13.1 percent this quarter and notched its best start to a year since 1998. It was the biggest gain for the S&P in any quarter since 2009.

The Dow Jones industrial average gained over 11 percent, while the tech-heavy Nasdaq rallied more than 16 percent. The small-cap Russell 2000 was up 14.2 percent.

Leading the way higher for U.S. stocks this quarter was the tech sector, which skyrocketed nearly 20 percent in the period. Tech giants Apple and Microsoft rose more than 16 percent each for the quarter, but the sector's best performer is an unlikely one: Xerox, which is up more than 60 percent.

Friday, March 29, 2019

Final Fourth Quarter GDP Is In

GDP posted a gain of just 2.2 percent in the fourth quarter, the Commerce Department reported yesterday in its final estimate of economic growth. That was down from the previous estimate of 2.6 percent and leaves full-year growth at 2.9 percent.

In all, 2018 was the best year for the economy since 2015 and well above the 2.2 percent increase in 2017. The economy grew 3 percent when compared with the fourth quarter of 2017. If it extends into July, the current economic expansion will then become the longest on record.

The reduction in the fourth quarter GDP number was because of revisions down in consumer spending, government expenditures at the state and national levels, and nonresidential fixed investment. Imports also were revised lower amid continuing tensions between the U.S. and its global trading partners.

Thursday, March 28, 2019

Mutual Funds Growing Fast

Mutual funds have been growing strong this year. Net flows added $36.7 billion to mutual fund coffers in January and $29.2 billion in February. Assets rose by 8.6 percent to $14.8 trillion as of the end of February, although that's still below the $15.4 trillion asset level reached in September.

Active mutual funds experienced positive net flows in February for the second month in a row. Total active assets climbed back over the $11 trillion mark in January, and ended February at $11.2 trillion.

ETF assets have also recovered from the fourth-quarter downturn, having risen to $3.72 trillion during February. This was a new all-time high, surpassing the $3.71 trillion amassed in September.

Wednesday, March 27, 2019

Buybacks at a Record High

The amount of shares repurchased by S&P 500 companies in the last quarter of 2018 reached a record high. The total value surged to $806.4 billion in 2018, up 55 percent from a year earlier, according to new data from S&P Dow Jones Indices. The record was more than 36 percent higher than the previous high-water mark hit in 2007.

This marked the fourth consecutive quarterly all-time high. Many of the biggest companies in America went on shopping sprees for their own shares, including Apple and Oracle Corp., both of which bought back roughly $10 billion worth of stock.

One reason for the record was the slide in global markets late in the year. The fourth quarter’s overall stock price decline permitted companies to buy up even more shares for their dollars.

Tuesday, March 26, 2019

Another Sign of the Economy Slowing

The National Association of Business Economists is the latest group, joining the Federal Reserve and the Business Roundtable, in downgrading its outlook for U.S. growth this year and next. The 55 business economists who contribute to the NABE outlook survey are now forecasting GDP growth of 2.4 percent this year, down from 2.7 percent previously, and 2 percent growth next year.

Three-quarters of respondents see more downside risks, compared with just 6 percent who see more upside, and a majority blame trade policy and slower global growth for the downside tilt. Nevertheless, NABE economists give low odds for a recession this year — around 20 percent — and just 35 percent odds for a recession in 2020.

The NABE also sees lower inflation on the horizon. They now forecast the Consumer Price Index to be at 2.1 percent throughout 2019, down from the 2.4 percent they had forecast previously.

Monday, March 25, 2019

The Inverted Yield Curve

The big news in the markets is that the yield spread between three-month and 10-year Treasuries fell below zero on Friday for the first time in more than a decade, creating what's known as an inverted yield curve. The 10-year Treasury note yield fell as low as 2.42 percent before closing at 2.45 percent, falling below the three-month T-bill yield at 2.455 percent.

The 3-month/10-year inverted curve is the most reliable signal of future recession, according to researchers at the San Francisco Fed. Inversions of that spread have preceded each of the past seven recessions, including the 2007-2009 contraction. They say it’s offered only two false positives — an inversion in late 1966 and a “very flat” curve in late 1998.

An inverted curve can be a source of concern for a variety of reasons. One reason is that short-term rates could be running high because overly tight monetary policy is slowing the economy. Or it could be that investor worries about future economic growth are stoking demand for safe, long-term Treasurys, pushing down long-term rates.

Friday, March 22, 2019

Mortgage Rates Dropping Again

Some positive news for the housing market: Mortgages rates for home loans are continuing to fall. The 30-year fixed-rate mortgage averaged 4.28 percent in the week of March 21, Freddie Mac said yesterday.

That was down another 0.03 percent from the prior week, putting the 30-year mortgage at a 13-month low. This figure has managed a weekly gain on only two occasions during 2019.

The 15-year adjustable-rate mortgage averaged 3.71 percent, down from 3.76 percent. With the Fed now intent on not raising rates for the remainder of the year, those mortgage rates may stay low for quite some time.

Thursday, March 21, 2019

The Fed Puts on the Brakes

The big news from the Federal Reserve: no more interest rate hikes will be coming this year. In a unanimous move, the Fed Open Market Committee yesterday turned significantly from its policy projections just three months earlier: Committee members had estimated in December that two rate hikes would be appropriate in 2019, after four increases in 2018.

The move came alongside reduced expectations in GDP growth and inflation and a bump higher in the unemployment rate outlook. Fed officials now see economic gains of just 2.1 percent this year, down from a 2.3 percent estimate in December, and inflation reaching 1.8 percent, down 0.1 percentage point. The unemployment rate for this year is now seen at 3.7 percent, up 0.2 percentage points from December.

In the statement explaining its decision, the committee said economic activity “has slowed” even though the labor market remains “strong.” More specifically, the statement said “recent indicators point to slower growth of household spending and business fixed investment in the first quarter,” when economic growth is expected to be modest.

Wednesday, March 20, 2019

Recession Worries Are Growing

Reading the tea leaves, it looks like corporate America is getting more worried about a recession. Analysis of S&P 500 2018 earnings transcripts from the fourth quarter shows fading exuberance among corporate executives, according to Gartner, Inc. “Mentions of the words ‘downturn’ and ‘slowdown’ were four times more likely to appear in earnings call in 4Q18,” they reported.

The most commonly cited economic concern was the slowing Chinese economy. This theme emerged strongly in the last quarter of 2018 and has picked up momentum in 2019 earnings calls. The companies most exposed to China were more likely to report demand weakness in 2018, or predict that it would be occurring in 2019.

But it should be noted that this is still a minority among American companies. Most executives remained optimistic about the U.S. economy in 2019. Sentiment was particularly positive in the technology and communications sectors.

Tuesday, March 19, 2019

The Most Expensive Cities in the World

It may feel like it costs a lot of money to live around here, especially up near New York City, but according to the latest figures from the Economist Intelligence Unit, the most expensive places in the world are mostly overseas. New York City is No. 8, and the Los Angeles was the only other American city to crack the list at No. 10.

Here are the Economist's Top Ten most expensive cities to live in:

1. Singapore
2. Zurich
3. Hong Kong
4. Paris
5. Geneva
6. Osaka
7. Seoul
8. New York
9. Copenhagen
10. Los Angeles
.

Monday, March 18, 2019

A Million Job Openings

Here's a milestone for the U.S. economy: There are now about 1 million more open jobs than unemployed workers. U.S. employers posted nearly 7.6 million open jobs in January, near a record high set in November, the Labor Department said Friday

The report, known as the Job Openings and Labor Turnover survey, showed that layoffs declined, a reassuring sign that employers weren't spooked by the government shutdown, which ended January 25. Nearly 3.5 million people quit their jobs in January, up 2.9 percent from the previous month.

Quits are a sign of a healthy economy, because people typically leave a job for another, usually higher-paying, one. Openings began to outpace the unemployed last spring, for the first time in the 18 years the data has been tracked.

Thursday, March 14, 2019

A Blip for Housing

Sales of new U.S. homes slumped 6.9 percent in January, But rather than seeing this as a sign of a slowing market, many experts attributed the drop to the fact that buyers were more tentative during the government shutdown.

The Commerce Department says that new homes sold at a seasonally adjusted annual rate of 607,000 in January, down from 652,000 in December. Purchases of homes yet to be constructed to fell a whopping 26.8 percent in January, accounting for all of the month's decline.

New-home sales in January ran slightly below the totals for the entirety of both 2018 and 2017. The median sales price of a new home in January fell 3.8 percent, to a nationwide average of $317,200.

Oil Prices at a High for the Year

Oil futures settled at their highest level since November yesterday, as weekly data revealed a surprise decline in U.S. crude stockpiles and a bigger-than-expected drop in gasoline inventories. West Texas Intermediate crude rose 2.4 percent to end at $58.26 a barrel.

The Energy Information Administration reported yesterday that U.S. crude supplies fell by 3.9 million barrels for the week ended March 8, well below expectations for a climb of 3.3 million barrels expected by analysts polled by S&P Global Platts. The EIA also reported that total domestic crude production inched down 100,000 barrels to 12 million barrels a day.

The EIA also lifted its 2019 forecasts for U.S. and global benchmark oil prices. That report, combined with U.S. sanctions on the oil industries in Iran and Venezuela, means we should probably expect oil prices to rise even further.

Tuesday, March 12, 2019

Inflation Returns, Barely

U.S. consumer prices rose for the first time in four months in February, but very slightly so: It was the smallest annual gain in nearly two and a half years. The Labor Department said on Tuesday its Consumer Price Index increased by just 0.2 percent, driven by gains in the costs of food, gasoline and rents.

In the 12 months through February, the CPI rose just 1.5 percent, the smallest gain since September 2016. The CPI had increased 1.6 percent on a year-over-year basis in January.

Excluding the volatile food and energy components, core CPI - the measure the Fed keeps an eye on - edged up 0.1 percent, the smallest increase since August 2018. Core CPI had increased by 0.2 percent for five straight months. In the 12 months through February, core CPI rose 2.1 percent.

Retail Sales Bounce Back Strong

U.S. retail sales came back strong in January, which is good news for the economy, indicating consumers may still be able to help support economic growth after a dismal end to 2018. But the decline in December was even worse than initially thought, according to a report out yesterday from the Commerce Department.

Excluding automobiles, gasoline, building materials and food services, retail sales rebounded 1.1 percent in January.  These so-called core retail sales are considered to correspond most closely with the consumer spending component of gross domestic product.

But the retail data for December was revised down to show sales dropping 1.6 percent instead of falling 1.2 percent, as previously reported. The drop in December was the biggest since September 2009, when the economy was just emerging from recession.


Sunday, March 10, 2019

Ten Years After

It was ten years ago this weekend that the market bottomed out in the midst of the Great Recession. Since March 9, 2009, when the S&P 500 bottomed out with its lowest close of 676, the index has delivered a ten-year annualized return of 17.8 percent.

 That number may not look familiar, but it is very similar to the returns reached after similar market drops. In the ten years after the October 1987 market crash, the S&P returned 17.2 percent. Just before the bull market of the 1980s, following the bottom reached in August 1982, the S&P returned 17.6 percent.

 In the course of that decade, the single top-performing AS&P stock is Ulta Beauty, which is up more than 7000 percent. Netflix is the second-biggest grower, with gains of more than 600 percent.

Friday, March 8, 2019

February's Jobs Report

Job growth slowed significantly in February, with the economy adding just 20,000 jobs, the Labor Department reported this morning. It was the worst month for job creation since September 2017. That compares with an increase of 311,000 jobs in January; in all of 2018, job growth averaged 223,000 per month.

Nevertheless, the headline unemployment rate fell to 3.8 percent. That's because there was an increase of 198,000 in those considered not in the labor force, while those classified as unemployed fell by 300,000 and the ranks of the employed decreased by 45,000.

Professional and business services saw the highest level of job creation in February, with 42,000 new positions. Health care added 21,000 and wholesale trade rose 11,000. On the downside, construction lost 31,000 and leisure and hospitality, a key component of the recovery, was flat.

Thursday, March 7, 2019

What's Going on With Trade

The trade gap grows ever larger: The U.S. trade deficit widened to $59.8 billion for the month of December, reaching its the highest level since October 2008, according to a Census Bureau report that came out yesterday. For the full year, the U.S. trade gap grew to $621 billion.

In 2018, the goods and services deficit increased $68.8 billion, or 12.5 percent, from 2017. When the service sector is excluded, focusing just on goods, the gap was even greater, rising to a record $891.3 billion.

The widening gap is more attributable to imports than exports. Imports rose 2.1 percent in December to $264.89 billion, while exports fell 1.9 percent to $205.12 billion.


Wednesday, March 6, 2019

The Transports Are Sliding

Here’s a scary factoid for people who like to follow the market’s technical indicators: The Dow Jones Transportation Average yesterday booked its longest stretch of consecutive losses since 2011, according to FactSet data. Dow transports fell for an eighth straight session, matching a decline that ended August 2, 2011.

The closely watched gauge is often used as a proxy for the health of the overall economy. But it's unusual for the transports to fall while the overall Dow is moving sideways.

Transports have declined 3 percent over the past eight sessions, as of yesterday’s close. The Dow industrials, meanwhile, have lost about 0.2 percent since February 21. By comparison, the last time the Dow transports fell for eight straight sessions, the Dow industrials shed nearly 7 percent.

Tuesday, March 5, 2019

Construction Is Slowing

U.S. construction spending unexpectedly fell in December as investment in both private and public projects dropped, the Commerce Department said yesterday. Construction spending declined 0.6 percent after an 0.8 percent increase in November.

All told, construction spending increased 4.1 percent in 2018, which is the weakest number for that figure since 2011. In December, spending on private construction projects fell 0.6 percent after rising 1.3 percent in November; investment in private residential projects dropped 1.4 percent after rising 3.4 percent in November.

The government reported the economy grew at a 2.6 percent annualized rate in the October-December period, which was strong but down somewhat from the third quarter's 3.4 percent pace. The slowing construction figures may have had something to do with that.

Monday, March 4, 2019

February's Stock Market Scorecard

After a fabulous January, Wall Street’s rally continued in February. The three major stock indexes — the Dow, S&P 500 and Nasdaq Composite — gained 3.7 percent, 3 percent and 3.4 percent, respectively. Year to date, the indexes have gained 11.1 percent. 11.1 percent and 13.5 percent.

That is the fifth biggest gain to start a year in all of the history of the S&P 500. It's also the best start since 1987, when the index gained 17.4 percent in its first two months.

Historically, when January and February have each gained, the year has ended up significantly positive. Since 1938, when both January and February were positive, the S&P ended up on average by more than 20 percent, and was positive 29 of 30 times.

Friday, March 1, 2019

A Strong Fourth Quarter GDP Report

U.S. economic growth was solid at the end of 2018, with GDP rising 2.6 percent, according to a first estimate the Commerce Department released yesterday. For the year, annual 2018 real GDP increased by 2.9 percent.

The biggest driver was non-residential investment, which is primarily business spending, which picked up with a 6.2 percent increase from 2.5 percent in the third quarter. This figure remained strong even as investing in structures declined 4.2 percent. Fixed investment growth of 3.9 percent – up from 1.1 percent in the third quarter – was driven by spending in research and development. R&D spending totaled $425 billion in the fourth-quarter, representing a 9.9 percent year-over-year increase.

Exports rose 1.6 percent in the quarter, reversing a 4.9 percent decline in the previous quarter. Imports increased by 2.7 percent, making trade overall a slight net negative on GDP.

Thursday, February 28, 2019

The World's Billionaires Are Hurting

Think you had a rough 2018? The stock market meltdowns in 2018 obliterated $1 trillion of the fortunes of the world’s richest individuals. That's according to a list by wealth compiler Hurun Report, China’s version of the Forbes rich list.

The list showed Chinese billionaires still outnumbered those from any other country as of January 31, with 658, although China also lost 212 billionaires last year. The U.S. had 584 billionaires, followed by Germany with 117.

Though Chinese and other Asians are steadily gaining in wealth, Amazon founder Jeff Bezos topped the global chart for the second year running, with wealth estimated by Hurun Global at $147 billion. Bill Gates ranked second with $96 billion and Warren Buffett was third with $88 billion.

Tuesday, February 26, 2019

Housing Is Down, but the News Isn't All Bad

The bad news: Construction on new houses sank 11 percent in December. Housing starts tumbled to an annual rate of 1.08 million in the final month of 2018 from 1.21 million in November, according to a report delayed by the recently ended partial government shutdown. That is the lowest level since September 2016.

Here's the good news: Builders applied for more permits in December, a sign that a rebound may be near. Permits to build additional houses edged up 0.3 percent to a 1.33 million annual pace, so builders will break new ground at a faster pace in early 2019.

Construction was flat in the Northeast, but that's not so bad, given the overall national landscape. New home construction fell in every other region of the country.

The Power of Buybacks

Is this market rally being fueled solely by buybacks? In the fourth quarter last year, American companies bought an estimated $240 billion of their own shares, according to an analysis by Goldman Sachs. That’s nearly 60 percent higher than during the same period in 2017.

More buybacks are coming. The Union Pacific railroad has bought nearly $32 billion in its own shares since 2007, and this month authorized buying over $20 billion more. Cisco has spent roughly $20 billion on buybacks in the past year, and has authorizations to spend another $24 billion. And Bank of America, which planned to buy $20 billion of its own shares by the end of June, just added $2.5 billion on top of that.

Meanwhile, individual investors remain nervous. Despite the market's strength, in every week this year, money has flowed out of domestic stock market mutual funds and exchange-traded funds — as much as $15 billion in the last week of January, according to EPFR Global.

Monday, February 25, 2019

Buffett's Big Loss

Warren Buffett is possibly the most successful investor ever, so when his investment vehicle Berkshire Hathaway posts a sizable quarterly loss, it's worth paying attention to why. According to the shareholder's letter that was released over the weekend, Berkshire suffered losses of $25.4 billion in the fourth quarter, in large part the result of a surprise write-down at Kraft Heinz.

On Thursday Kraft Heinz reported weak fourth-quarter earnings and a $15.4 billion write-down. Berkshire owns a nearly 27 percent stake in the food conglomerate. “Indeed, in the fourth quarter, a period of high volatility in stock prices, we experienced several days with a ‘profit’ or ‘loss’ of more than $4 billion,” Buffett wrote in his shareholder's letter.

Overall, Berkshire owns $173 billion of stocks, and the market's swoon in the fourth quarter helped cause losses of $22.7 billion on those securities. But stocks have recovered this year, and many of those losses have now been reversed. We'll find out how much in the next Berkshire letter.

Friday, February 22, 2019

A World of Dividends

Last year was a good one for dividend investors. Global dividends rose to a new record in 2018, with a strong fourth quarter for dividend payments, according to the latest Janus Henderson Global Dividend Index. Total dividends jumped 9.3 percent to $1.37 trillion. This is the best performance since 2015 and exceeds the long-term trend of 5 percent to 7 percent.

Some sectors showed even more growth than that. Banking dividends, the largest dividend-paying sector, jumped 13.6 percent. Oil company distributions surged 15.4 percent.

Meanwhile, according to the index, the telecom sector stood out as the weakest, with payouts flat or down in half the countries. That's striking considering that only one in 25 U.S. companies cut its payout.

Thursday, February 21, 2019

Patience, Says the Fed

The Federal Open Market Committee released minutes from its two-day January meeting on Wednesday. In the minutes, the Fed laid out more detail as to why it decided to be patient with monetary policy, and it looks like more rate hikes are off the table for the time being.

Following four rate hikes in 2018, the Fed announced last month that it would hit the pause button and keep its benchmark Fed funds rates steady at the 2.25 percent to 2.5 percent target range. But it was unclear how long the central bank planned on doing so.

Now we know a bit more detail. The FOMC meeting minutes included 13 mentions of the word “patient,” saying there were a “variety of considerations that supported a patient approach.” Furthermore, “a patient posture would allow time for a clearer picture of the international trade policy situation and the state of the global economy to emerge and, in particular, could allow policymakers to reach a firmer judgment about the extent and persistence of the economic slowdown in Europe and China.”

Wednesday, February 20, 2019

Confidence in Retirement

Are you increasingly confident about your retirement? More Americans are these days. The University of Michigan's "Change in the Likelihood of a Comfortable Retirement Compared with Five Years Ago" hit a level of 109 in February. The index hadn't been at that level since January 2001.

Supporting that positive outlook, a recent Fidelity Investments survey of more than 3,100 households showed that the typical saver is on track to have 80 percent of the income the financial services company estimates older Americans will need to cover expenses in retirement. The average 401(k) account at Fidelity hit $104,300 during the fourth quarter of 2017.

The median savings rate in a retirement plan is now 8.8 percent of pay, up from 3.6 percent in 2006, according to Fidelity. However, that is still far below Fidelity's suggested savings rate of 15 percent of salary, including employer matches.

Tuesday, February 19, 2019

An Incredible Six Weeks

The year-to-date gain for the S&P 500 eclipsed 10 percent on Friday. That is already better than what the index typically sees over an entire year, and it's the best start to a year for the market in 32 years.

The gains have been remarkably broad-based. Through the first month and a half of 2019, all the sectors in the S&P 500 are in positive territory. In fact, none of them are even close to negative. The worst performing sector has been the utilities, and even they are up 4.7 percent so far.

On the other hand, industrials are up 17.3 percent, energy is up 14.6 percent, and real estate is up 12.7 percent. That's a remarkable performance for about six weeks' worth of trading.

Monday, February 18, 2019

Thoughts for Presidents' Day


“99 percent of failures come from people who make excuses.” ~ George Washington

"He was reluctant to accept office. Nothing would have pleased him more than to remain in equable but active retirement at Mount Vernon, improving the husbandry of his estate. But, as always, he answered the summons of duty." ~ Winston Churchill

“I am not bound to win, but I am bound to be true. I am not bound to succeed, but I am bound to live up to what light I have.” ~ Abraham Lincoln

"Mr. Lincoln was not only a great President, but a great man — too great to be small in anything." ~ Frederick Douglass

Friday, February 15, 2019

Retail Falls in December

U.S. retail sales recorded their biggest drop in more than nine years in December as receipts fell across the board, the Commerce Department said yesterday. (The release of the December figures was delayed by the government shutdown.) Retail sales tumbled 1.2 percent, the largest decline since September 2009, when the economy was still in the depths of the recession.

Even more surprising, sales at internet sellers tumbled 3.9 percent, marking their worst performance since November 2008, in the midst of the financial crisis. Those sales had increased 2.8 percent in November. Receipts at service stations dropped by 5.1 percent, the biggest fall since February 2016, reflecting cheaper gasoline prices.

In other categories, receipts at restaurants and bars fell 0.7 percent. Spending at hobby, musical instrument and book stores fell by 4.9 percent, the biggest drop since September 2008.

Thursday, February 14, 2019

For Love or Money

Happy Valentine’s Day! Do people look more for love or for money in their romantic relationships? Merrill Edge recently conducted a survey on that very question, and found that 56 percent of Americans say they want a partner who provides financial security more than “head over heels” love (44 percent).

This sentiment is held in almost equal measure by both men and women (54 percent and 57 percent). Only the youngest group,  those born between 1996 and 2010, chose love (54 percent) over money.

One other finding: Wealthier couples don’t necessarily last longer than those who earn less. Indeed, the more you spend on a wedding ceremony, the shorter the marriage: Couples who spend $20,000 on their wedding are 46 percent more likely than average to get divorced; that risk falls to 29 percent higher than average for those who spend $10,000 to $20,000.

Wednesday, February 13, 2019

Completely Back from the Recession

Americans' optimism about their personal finances has climbed to levels not seen in more than 16 years, with 69 percent now saying they expect to be financially better off "at this time next year," according to a new Gallup survey. That's only two percentage points below the all-time high of 71 percent, recorded in March 1998.

Ten years ago, as the Great Recession neared its end, the percentage saying their finances had improved from the previous year was at a record low of 23 percent. More than half the public, 54 percent, said they were worse off. Now, the number saying they are worse off than a year ago has dropped to 26 percent, the lowest level since October 2000.

Fifty percent say they are better off today than they were a year ago. That 50 percent represents a post-recession milestone - the first time since 2007 that at least half of the public has said they are financially better off than a year ago.


Tuesday, February 12, 2019

What Keeps Inflation in Check?

It may seem obvious, but a new paper on inflation from the San Francisco Federal Reserve confirms it. The key to keeping prices from rising too quickly is keeping the public confident inflation. The paper also suggested the unemployment level is all but irrelevant to the inflation trajectory.

The San Francisco Fed economists tested what would happen to inflation with varying levels of unemployment, or if there were a lot less slack in the labor market. The results were very little change to the inflation trajectory. But when the researchers modeled what would happen if inflation expectations were to rise, they found that actual inflation would rise very quickly,  too.

That's not the only factor, though. The U.S. unemployment rate is still at a very low 4 percent, but inflation has barely touched the central bank’s 2 percent target. Some Fed policymakers continue to believe the tightening job market will at some point put upward pressure not only on wages but also on prices. At some point, inflation will be back.

Monday, February 11, 2019

The Big Legacy Questions

A disconcerting new report from Merrill Lynch in partnership with Age Wave found that only 55 percent of Americans aged 55 or older have wills. Only 18 percent have the three recommended essentials — a will, health care directive and durable power of attorney.

Respondents with $1 million or more in investable assets were the most prepared — 41 percent of them had taken care of the three essentials, compared with 27 percent for those with $250,000 to just under $1 million in assets. But even for this group, that’s still less than half.

Passing on values and lessons was considered the most important part of one’s legacy, cited by 59 percent of respondents. Asked to identify what they want to be remembered for, respondents overwhelmingly said it was the memories they shared with loved ones (70 percent) rather than the wealth they had accumulated (5 percent).

Friday, February 8, 2019

The Market Beats Earnings Season

Here's a paradox: Even though corporate earnings have been relatively weak so far, with fewer companies beating Wall Street expectations than in recent quarters, the S&P 500 is up roughly 5 percent since the middle of January. Stocks of companies that have reported their results have risen by an average of 1.1 percent, the largest post-earnings jump in a decade, according to Bespoke Investment Group.

They're doing all right even if they don't beat the Street's analysts. In recent years, the shares of companies that didn’t beat expectations lagged behind the broader market by 3.5 percentage points in the trading day that followed. This year, they have trailed by only 1.1 percentage points, according to Credit Suisse.

Over the last three months, overall, stocks reporting earnings have posted a median one-day gain of 0.78 percent.  That’s the strongest upside reaction to earnings in at least the last five years.


Thursday, February 7, 2019

Apple Retakes the Throne

Two months after losing its title as the most valuable U.S. public company, and a month after revealing that iPhone sales were disappointing in the holiday season, Apple has regained its throne as the world's biggest company. Apple ended the session with a market capitalization of $821.6 billion, according to FactSet data. That performance was good enough to land atop Microsoft and Amazon.com, which both declined 1.1 percent on the day.

What's most remarkable is how similar the valuations are for America's top four companies. At the end of yesterday's trading, they looked like this:

  1. Apple $821.6 billion
  2. Microsoft $813.5 billion 
  3. Amazon $805.7 billion 
  4. Alphabet $778.1 billion

Tuesday, February 5, 2019

Why Is Lending Slowing Down?

The U.S. Federal Reserve’s quarterly survey of senior loan officers, just out yesterday, showed that the demand for loans weakened among U.S. businesses and households in the last three months of 2018. Banks had kept standards for commercial and industrial lending “basically unchanged” in the quarter, although they had tightened standards for credit card borrowing.

And the banks said they were likely to be even less generous with credit in the coming year. In an assessment that sounded foreboding for the economy, banks said they expected in 2019 “to tighten standards for all categories of business loans as well as credit card loans and jumbo mortgages."

In the fourth quarter of 2018, U.S. "banks reported weaker demand for all categories of loans to households," the Fed said. That will be something to keep an eye on in the first quarter of 2019.

Monday, February 4, 2019

What January Means

The S&P 500 jumped 7.9 percent last month, its best January performance since 1987, and its biggest gain in any month since October 2015. The Dow rose 7.2 percent in January, which was also its largest one-month rise since 2015 and biggest January gain in 30 years.

Remember December? In that month, the S&P 500 fell 9.18 percent and briefly dipped into bear-market territory on Christmas Eve. Since December 24, however, stocks have been on a tear, with the S&P 500 rising about 15 percent.

It’s often said that as goes January, so goes the year. According to Stock Trader’s Almanac, going back to 1950, January’s performance has predicted the year’s returns 87 percent of the time. But the indicator also signaled a positive year last year, and the market’s December sell-off ended up wiping out all of the gains. The S&P 500 ended 2018 down 6.6 percent, despite rising 5.6 percent in January.

Friday, February 1, 2019

January's Jobs Report

Another strong month for the employment figures, as the Bureau of Labor Statistics reported this morning that the economy added 304,000 jobs in January. That compares with an average monthly gain of 223,000 in 2018, and 241,000 over the past three months.
 
The headline unemployment figure ticked up to 4.0 percent, which the BLS attributed in part to the now-ended government shutdown. But federal employees on furlough during the partial government shutdown were counted as employed in the establishment survey, because they worked or received pay for the pay period that included the 12th of the month.
 
In January, jobs in leisure and hospitality rose by 74,000, construction employment rose by 52,000, and employment in health care increased by 42,000.  The BLS also reported that there were 17,000 jobs added in the category of “sporting goods, hobby, book, and music stores.”

Thursday, January 31, 2019

The Fed Eases Back

As expected, the Federal Reserve kept interest rates unchanged in a range of 2.25 percent to 2.5 percent after its meeting yesterday. The Fed also signaled it would be “patient” about further interest-rate moves, and even added that policymakers were open to slowing the pace of the runoff of its balance sheet if needed.

In December, the Fed said it still expected the next policy move would be to raise interest rates. But yesterday, the central bank backed away from any forward guidance about monetary policy, suggesting the next move could be to raise or lower interest rates.

The Fed also indicated a greater willingness to keep its roughly $4 trillion portfolio of government bonds, in the hopes that they would help prevent long-term rates from rising if the economy falters. That marks a shift from its prior plan to steadily shrink its balance sheet.

Wednesday, January 30, 2019

Apple's Earnings Report

Apple reported earnings after the bell yesterday, right in line with expectations: First-quarter revenue was $84.3 billion, while Wall Street was looking for $83.97 billion. Total sales were $88.3 billion.

But iPhone revenue came in slightly below projections. Quarterly iPhone revenue was $51.98 billion vs. a $52.67 billion forecast, but sales of iPhones plummeted 15 percent during the holiday period. Apple said there were 900 million active iPhone users in the world — the first time the company has disclosed the size of that market.

Apple’s sales represent a year-over-year decline of 5 percent, its first annual revenue decline during a holiday season quarter since 2001. Apple says that 100 percent of that decline was driven by performance in China, where the company saw almost $5 billion less in revenue than a year ago.

Tuesday, January 29, 2019

IPOs in Store for 2019

The just-ended government shutdown had the effect of shutting the IPO market as well, as the Securities and Exchange Commission was unable to provide the approvals that issuers need to move their registration statements forward to launch. Between the government shutdown and negative returns in 2018, there have been no IPOs in 2019 so far, compared with 17 deals that were completed in the same time frame in 2018.

Nine U.S.-based startups have been valued at more than $10 billion by private investors — and at least five are expected to go public in 2019. This would follow a big 2018, during which 38 companies valued at $1 billion or more went public.

Both Lyft and Uber have already filed confidential IPO paperwork, putting them on track for potential offerings. Other possible big name IPOs this year include Airbnb, Palantir, and Pinterest.

Monday, January 28, 2019

Earnings Season, With a Caveat

The fourth quarter 2018 earnings season continued to pick up steam this week as more than 100 companies reported earnings. Next week things kick into full gear, however, with an estimated 325 companies set to report.

The readings have been strong so far, but with a major caveat. Historically, the earnings beat rate drifts lower as earnings season progresses. The bottom-line earnings per share beat rate now stands at 64.7 percent, which is roughly in line with the final reading seen last quarter - but it's also low for where we are in the reporting period.

On the revenue side, 54.9 percent of companies that have reported this season have beaten consensus revenue estimates. In this category, top-line beats this season are weaker than normal.

Friday, January 25, 2019

Financial Satisfaction Takes a Hit

Americans’ personal financial satisfaction fell in the fourth quarter for the first time in seven quarters as market volatility took a toll on their confidence, the American Institute of CPAs reported yesterday. The AICPA’s personal financial satisfaction index clocked in at 30.9, a 1.4 drop from the third quarter. That erased 24 percent of the index’s gains from the previous three quarters.

The report noted that this was only the fourth time the index had decreased since climbing from a -42.0 bottom in the third quarter of 2011. But even with the decline, the PFSi, defined as the Personal Financial Pleasure Index minus the Personal Financial Pain Index, was still solidly in positive territory and not too far from recent record highs.

The single largest factor in the decline was the stock market's volatility in the fourth quarter of last year. The Job Openings and CPA Expectations outlooks also declined at a much smaller rate.

Thursday, January 24, 2019

Early Warning for Valentine's Day

Make your alternate plans early: America’s favorite Valentine’s Day candy won’t be available this year. Sweethearts, the conversation candy hearts that say KISS ME or MAD 4 YOU, will be missing from shelves this Valentine’s season after its original producer went out of business last year.

Candystore.com reports that conversation hearts were the most popular candy for the holiday in 2018. But that didn’t keep its original producer, New England Confectionary Company, known as Necco, from going out of business in July. Spangler, a candy company best known for its Dum Dum lollipops, acquired the Necco wafer and Sweethearts brands in September but did not have the time to produce the conversation hearts for this Valentine’s Day.

Sweethearts were the most popular Valentine’s candy here in New Jersey as well. So this year, you may have to settle for M&Ms, which were in second place in the Garden State last year, or a heart-shaped box of candy, which was third.

Tuesday, January 22, 2019

Cracks in the Housing Market

The American housing market is starting to show some surprising signs of weakness. U.S. home sales tumbled to their lowest level in three years in December and house price increases slowed sharply, according to the National Association of Realtors.

Existing home sales declined 6.4 percent to a seasonally adjusted annual rate of 4.99 million units last month. That was the lowest level for that figure since November 2015. Existing home sales, which make up about 90 percent of U.S. home sales, dropped 10.3 percent on a year-over-year basis.

Meanwhile, the median existing house price increased just 2.9 percent from a year ago, to $253,600 in December. That was the smallest monthly increase since February 2012.

Monday, January 21, 2019

The Global Economy Is Slowing

The International Monetary Fund announced yesterday that it has cut its forecast for world economic growth this year, citing heightened trade tensions and rising U.S. interest rates. The IMF said it expects global growth this year of 3.5 percent, down from 3.7 percent in 2018 and down from the 3.7 percent it had forecast for 2019 back in October.

Growth in emerging-market countries is forecast to slow to 4.5 percent from 4.6 percent in 2018. But the biggest factor is that the IMF expects the Chinese economy — the world’s second biggest — to grow 6.2 percent this year, down from 6.6 percent in 2018.

That would be China's slowest growth rate since 1990. The country's economic downturn deepened in the final months of 2018, with fourth quarter growth rising just 6.4 percent from a year earlier. The official Chinese jobless rate ticked up to 4.9 percent last month from 4.8 percent in November.

The Weight of Student Debt

In a new report out from the Federal Reserve, rising student debt has been linked to a drop in homeownership among young Americans as well as to the flight of college graduates from rural areas. Homeownership among people ages 24 to 32 fell 9 percentage points, to 36 percent from 45 percent, between 2005 and 2014, the Fed said.

While many factors affected the homeowner rate, the Fed said 2 percentage points, or about a fifth, of the decline was tied directly to student debt. That translated into 400,000 borrowers who could have owned a home by 2014 but didn’t because of student loans.

The effect of student debt on the economy has increased in recent years, as the total has soared to $1.5 trillion. That's a greater debt load than Americans’ credit-card and car-loan bills.

Friday, January 18, 2019

The Market's Strong Start

After a rough end to 2018, the markets are off to a good start in 2019. The S&P 500 Index is up 5.2 percent for the year so far - the strongest 12-day start to a calendar year in 32 years.

The Dow Jones Industrial Average is up 4.5 percent over the same period, while the Nasdaq Composite Index has logged a 6.8 percent advance. Small-cap stocks, as gauged by the Russell 2000 index are off to their best start in 32 years, boasting a gain of 8.8 percent this year.

That's the good news. The bad news is that 32 years ago was 1987, when the Russell rose 11.9 percent over the first 12 trading days and the S&P rallied 11.2 percent. But that was also the year of Black Friday, when the Dow sank by more than 22 percent in a single day.

Thursday, January 17, 2019

Import Prices Take a Sudden Drop

U.S. import prices fell for a second straight month in December, the Labor Department reported yesterday. The cost of petroleum products tumbled and a strong dollar helped bring down prices of other goods, leading to the largest annual drop in import prices in more than two years.

Overall, import prices declined 1.0 percent last month. In the 12 months that ended in December, import prices fell 0.6 percent, marking the biggest annual drop since September 2016.

It was also the first year-on-year decline since October 2016, following a 0.5 percent rise in November. The drop of 0.6 percent in 2018 meant that this was the first calendar year drop since 2015. This comes on the heels of an increase of 3.2 percent in 2017.

Wednesday, January 16, 2019

Fourth Quarter Growth Slows

Earnings growth is hitting the brakes for the fourth quarter. Firms in the S&P 500 were projected back in September to report fourth-quarter earnings growth of 17 percent from the year earlier. But dimmer expectations for global growth and disappointing holiday sales have forced many companies to slash their forecasts, pushing the estimated earnings-growth rate for the quarter closer to 11 percent, according to FactSet.

For the fourth quarter, the consensus growth for the S&P 500 was 10.6 percent through Friday. That compares to the average reported growth of 25.5 percent for the first three quarters of the year, and would represent the lowest expected growth since 7.3 percent in the third quarter of 2017.

And for the first time since that third quarter of 2017, the growth won’t be unanimous across all sectors. The utilities sector is the only one of 11 S&P 500 sectors expected to report an earnings decline.

Tuesday, January 15, 2019

Inside the Lives of Wealthy Children

Nine in 10 of children of very wealthy parents say the most important thing they will inherit is their parents’ values, not their wealth, and 84 percent want to build on their family’s legacy. That's according to a national survey of slightly more than 1,000 young people aged 16 to 26, focused on the children of parents whose net worth ranged from $1 million to over $10 million, conducted by Wells Fargo Private Bank.

Some of the study's other findings:

  • Just 1 in 3 report having a formal meeting to discuss finances and 90 percent said they don’t meet regularly on the topic, though 60 percent of them would find that valuable.
  • Half of those who do meet regularly with their family on finances say there are ground rules for the discussion such as confidentiality and taking turns.
  • While most support their family’s charitable giving, 40 percent say they want to have a stronger voice in their family’s philanthropy and 44 percent don’t discern a specific giving strategy.
  • 65 percent express confidence in their ability to manage the family wealth.

Monday, January 14, 2019

Big Banks Kick Off Earnings Season

The markets are off to a strong start in 2019, but this week may change things, when several financial giants will start off earnings season with their quarterly reports. On Monday, Citigroup kicks things off with earnings before the open.  While the stock has beaten earnings estimates 74 percent of the time, it has averaged a one-day decline of 0.35 percent on its earnings reaction days.

JP Morgan and Wells Fargo report Tuesday morning. On Wednesday morning it’s all financials on the calendar — Bank of America, BNY Mellon, BlackRock, Goldman Sachs, PNC, Charles Schwab, and US Bancorp. Thursday morning will be led by Morgan Stanley, while American Express will report Thursday after the close.

Financial stocks have been beaten down over the past year. They are currently hovering around bear market territory, with the XLF, a financial ETF that tracks the big banks, down about 19 percent off its 52-week high, hit last January 29.

Friday, January 11, 2019

The Market Recovers From Christmas

Remember the carnage just before Christmas? The Dow Jones industrial average and the S&P 500 Index registered their fifth straight gains yesterday, which means that both indexes have now exited their corrections, defined as a drop of 10 percent from a market high.

The Dow has climbed 10.1 percent from its December 24 low, while the S&P 500 has gained 10.4 percent from that Christmas Eve low. That was the day that stocks put in the worst performance ever on the day before Christmas.

Meanwhile, the Nasdaq Composite Index is up nearly 13 percent from its own Christmas Eve low, but that index remains squarely in bear-market territory, usually defined as a decline of at least 20 percent from a bull-market peak. The Nasdaq needs to climb another 7.7 percentage points to break out of its bear market, which it entered on December 21.

Thursday, January 10, 2019

Small Caps: The Next Big Thing?

The asset class to watch this year may turn out to be small caps. Analysts are expecting firms in the Russell 2000 index of small-capitalization companies collectively to post double-digit profit gains throughout 2019, according to financial-data provider Refinitiv, far outpacing the S&P 500.

Refinitive projects that profits across the Russell 2000 will grow by nearly 16 percent in the first quarter from a year earlier, building on the 12.6 percent earnings growth rate those companies were expected to hit in the final three months of 2018. By contrast, the S&P 500 is projected to expand earnings by around 6 percent in each of the first two quarters of the year.

That would be a turnaround from the way we closed 2018. The Russell 2000 fell 12 percent last December, its worst month ever. The index slid more than 20 percent from its August 31 record high to post its worst annual performance since the 2008 crisis.

Wednesday, January 9, 2019

Credit Keeps Steaming Forward

Consumer borrowing stayed strong for the second straight month in November, a good sign for the economy. The Federal Reserve reported yesterday that total consumer credit increased $22.1 billion in November. That figure is down only slightly from a $25 billion gain in October, which had been the fastest pace in 11 months.

This is the third month out of the past four in which total consumer credit has grown by more than $20 billion. That hadn’t happened in four years. Prior to these recent months, consumer credit had been trending around a $15 billion growth rate.

Revolving credit, which includes things like credit cards, actually cooled off a bit in November, rising by 5.5 percent after a 10.9 percent gain in October. On the other hand, nonrevolving credit, which is typically auto and student loans, picked up, rising 7.1 percent in November after a 6.5 percent gain in the prior month.

Tuesday, January 8, 2019

Changes at the Top

For years, Apple was the most valuable corporation in the world, with its market valuation exceeding $1 trillion for a time. That changed at the end of November, when Apple stumbled and Microsoft beat it out. November was the first time in eight years that Microsoft was bigger than Apple.

But Microsoft's reign at the top ended up lasting just over a month. Amazon.com reached $797 billion in market value yesterday, overtaking Microsoft's roughly $788 billion valuation to become the most valuable publicly traded company in the U.S.

For its part, Apple isn't even Number Three anymore. Apple finished yesterday with a market cap of $702 billion, placing it at Number Four behind Google-parent Alphabet’s $746 billion.

Monday, January 7, 2019

Some Troubling Trends in Retirement

There's a troubling new look at the confidence of those of us in retirement. According to a new study from Transamerica, only 46 percent of retirees agree that their nest egg is large enough to sustain them throughout retirement.

More than half of them, a total of 56 percent, ended up retired sooner than they planned, at an average age of 63. But just 11 percent of them retired early because they were financially able to do so; 54 percent pointed to employment-related reasons for early retirement, including job loss, organizational changes, general unhappiness, and/or an incentive or buyout, and 47 percent cited health woes or family reasons.

Many are getting by on pretty small incomes: Their estimated median household income is just $32,000, with 25 percent having a household income of less than $25,000. Just 15 percent have an income of $100,000 or more. 

Friday, January 4, 2019

December's Jobs Report

The economy added an unexpectedly strong 312,00 jobs in December, the Bureau of Labor Statistics reported this morning.  U.S. employers hired their highest number of workers in 10 months, while also boosting wages. Nevertheless, the unemployment rate rose to 3.9 percent in December, due to growth in the overall labor force, up from 3.7 percent in November.

The employment figures for October and November were also revised to show 58,000 more jobs added than previously reported. All told, the economy created 2.6 million jobs last year, compared to 2.2 million in 2017.

There was more good news on the wage front. Average hourly earnings rose 11 cents, or 0.4 percent, in December after gaining 0.2 percent in November. That lifted the annual increase in wages to 3.2 percent.

Thursday, January 3, 2019

2018's Biggest Winners

In 2019, even the winners had a roller-coaster ride. The biggest-gaining stock in the S&P 500, Advanced Micro Devices, was up 79.6 percent on the year - even though it lost 40 percent of its value in the fourth quarter.

The Top Ten biggest winners in the S&P last year:

  1. Advanced Micro Devices (AMD), up 79.6 percent
  2. Abiomed (ABMD), up 73.4 percent
  3. Fortinet (FTNT),  up 61.2 percent
  4. Advance Auto Parts (AAP), up 57.9 percent
  5. TripAdvisor (TRIP), up 56.5 percent
  6. Chipotle Mexican Grill (CMG), up 49.4 percent
  7. Keysight Technologies (KEYS), up 49.2 percent
  8. Red Hat (RHT), up 46.2 percent
  9. O'Reilly Automotive (ORLY), up 43.1 percent
  10. Boston Scientific (BSX), up 42.6 percent


Wednesday, January 2, 2019

Farewell to 2018

Let's get the bad new out of the way quickly: For the year 2018, the S&P 500 fell 6.2 percent, the Dow Jones industrial average dropped 5.6 percent, and the Nasdaq Composite lost 3.9 percent. That marked the worst annual performances for all three indexes since 2008.

Much of the blame lay on a horrible December. In the last month of the year, the S&P 500 and Dow both logged their worst monthly declines since February 2009, and their worst performances for the month of December since 1931.

How unlikely was the late-year decline? This year marked the first time since 1978 that the Dow finished out the year in the red after rising in the first three quarters. It was the first time the S&P 500 had done so since 1948.

Tuesday, January 1, 2019

Thoughts for New Year's Day

"Every time you tear a leaf off a calendar, you present a new place for new ideas and progress." ~ Charles Kettering

"A year from now, you're gonna weigh more or less than what you do right now." ~ Dr. Phil McGraw

"All of us every single year, we're a different person. I don't think we're the same person all our lives." ~ Steven Spielberg