One Eye on the Bond Market

Is there trouble ahead in the stock markets? Some analysts have begun cautioning that a bubble is forming in credit markets. Companies have been piling on debt in recent years to take advantage of low interest rates, or more recently, to get ahead of a series of well-telegraphed interest-rate hikes.

As a result, the U.S. primary corporate bond market is at record levels. The investment-grade market saw $1.44 trillion of issuance in 2,127 deals through December 26, topping the record $1.34 billion recorded in 2016, according to data analytics company Dealogic.

The high-yield market has chalked up $266.3 billion of debt in 469 deals, making it the fourth-biggest year for issuance. The high-yield record was set in 2012, when issuers sold $321 billion of debt in 604 deals.

Reasons for Confidence

Consumer confidence fell in December, a month after hitting a 17-year high. That's the bad news. The good news is that the level of optimism among Americans for the entire year was the highest it's been since 2000.

Americans were a little less confident in their outlook for jobs and business conditions.  An index that measures future conditions dipped to slightly below average. Consumers were more cheery about conditions right now: The “present” situation index reached its highest level since 2001.

Notably, only 15.2 percent of Americans said jobs were “hard to get,” a 16-year low. The labor market is the strongest its been in years, with a 4.1 percent unemployment rate that's our lowest since December 2000.

On the Mark

Most economic forecasts are not worth the pixels it takes to read them, but 2017 was actually a pretty good year for the pundits. The Wall Street Journal recently reviewed the survey of economists it took at the beginning of this year, and in some cases, the respondents came pretty close:

Unemployment Rate
Average forecast for December 2017: 4.5 percent
Actual (as of November 2017): 4.1 percent

Real Gross Domestic Product
Average forecast for 2017 (year-over-year growth in fourth quarter): 2.4 percent
Actual (year-over-year growth in third quarter): 2.3 percent

Inflation
Average forecast for annual change in consumer-price index in December 2017: 2.3 percent
Actual annual change in CPI as of November 2017: 2.2 percent

Christmas Retail Cheer

U.S. retail sales in the holiday period rose at their best pace since 2011, according to Mastercard SpendingPulse, which tracks both online and in-store spending. Sales, excluding automobiles, rose 4.9 percent from November 1 through Christmas Eve, compared with a 3.7 percent gain in the same period last year. E-commerce continued to drive the gains, rising 18.1 percent.

Consumer credit-card debt reached its highest level since the end of 2008. It jumped 11 percent from a year earlier to $757 billion in the third quarter of 2017, according to Experian PLC, a credit-reporting agency.

This has meant Christmas cheer for retail stocks, too. Shares of Macy’s and Gap, for example, have jumped 24 percent and 18 percent, respectively, in the past month, compared with a 3 percent gain in the S&P 500. Wal-Mart has rallied 40 percent on the year and, like online nemesis Amazon.com, is trading near all-time highs.

Thoughts for Christmas Day

“He who has not Christmas in his heart will never find it under a tree.” ~ Roy L. Smith

“Christmas! The very word brings joy to our hearts. No matter how we may dread the rush, the long Christmas lists for gifts and cards to be bought and given--when Christmas Day comes there is still the same warm feeling we had as children, the same warmth that enfolds our hearts and our homes.” ~ Joan Winmill Brown

“How many observe Christ's birthday! How few, His precepts!” ~ Benjamin Franklin

What Do Corporations Pay in Taxes?

One of the primary features of the newly passed tax bill is that it lowers the corporate tax rate from the previous standard of 35 percent to just 21 percent. But most companies find enough deductions and benefits to effectively pay a lower marginal rate.

The MarketWatch website asked a good question: How much do America's largest corporations actually pay in taxes right now? It found the following effective annualized tax rates:

• Apple: 26.1 percent
• Microsoft: 23.8 percent
• Alphabet: 21.1 percent
• Amazon: 31.5 percent
• Facebook: 40.3 percent

That Daily Grind

Does it feel like your daily commute is taking longer? You're not alone. New data from the Census Bureau this month shows that in 2016, commuting times took an average of 26.1 minutes, nearly a minute more than in 2010.

Most of those commutes are spent in the car. Census data show that more than 85 percent of workers drive or carpool to their job, a figure that hasn’t changed much in recent years. Only about 5 percent took public transit, 4.6 percent worked from home, 2.8 percent walked and 0.6 percent rode a bike.

But it could be worse: East Stroudsburg, Pennsylvania, won the dubious honor of having the longest average commute of all metropolitan areas, clocking in at 38.6 minutes of travel time to work. The East Stroudsburg region sits roughly 75 miles from New York City and about 50 miles from the Pennsylvania cities of Scranton and Wilkes-Barre.

Financial Issues Behind Divorce and Widowhood

Ending marriages is an unfortunate reality of modern American life, when some four in 10 marriages fail and about a quarter of Americans 65 and older become widowed. TD Ameritrade recently looked at the challenges of divorce and widowhood in the U.S. and uncovered some disturbing findings.

Sixty-five percent of married individuals do not have a financial plan in place in the event of a divorce or spouse's death. But 72 percent of men and 62 percent of women expressed confidence in their ability to manage their own financial situation if faced with one of those events.

But the end of a marriage usually entails some financial hardship. Married individuals in the study reported annual personal income of $61,700. That's $13,100 more than widows/widowers reported and $9,800 more than divorcees.

That Fast-Breaking Nasdaq

The Nasdaq marked its first close above 6000 fewer than eight months ago. Today, it might close at 7000. Yesterday, the index closed at 6994.76 after climbing as high as 7003.89, its first intraday trading above 7000 ever.

The Nasdaq index, which has a weighting of nearly half tech stocks, is up 30 percent this year. That's significantly higher than the 20 percent rise in the more diversified S&P 500.

The 165-day stretch since crossing 6000 puts the index on pace to achieve its third-fastest 1000-point rise on record. The only time the Nasdaq ever moved faster was during the height of the dot-com bubble.

Fears Persist for Future Retirees

The  newly released18th Annual Transamerica Retirement Survey found that workers across the generations still have major fears and concerns about ending their careers. The survey finds that more than half of workers (53 percent) expect to retire after age 65 or do not plan to retire, and 56 percent plan to continue working at least part-time in retirement. Among them, 83 percent cite financial-related reasons for doing so, while 75 percent cite healthy aging-related reasons, such as "being active," and "keeping my brain alert."

The respondents were pessimistic about their future. Almost four in five workers (79 percent) believe that their generation will have a much harder time achieving financial security in retirement compared to their parents' generation. Millennials (83 percent) and Generation X (80 percent) are more likely to feel this way than Baby Boomers (75 percent).

The survey put some hard figures on how much different generations have saved for retirement. Baby Boomers have saved an estimated $164,000 in all household retirement accounts, Generation X has saved $72,000, and Millennials have saved $37,000.

The Quiet Market

The stock market is closing in on its quietest year in more than half a century. The S&P 500′s average daily up-or-down move so far this year is just 0.3 percent, about half of the average daily move in 2016. If it finishes the year this way, it would be the smallest absolute average daily move since 1964, and the second smallest on record.

There have been just eight 1 percent moves in 2017, which, if it stays that way, would be the fewest since 1965. There have been zero 2 percent up-or-down moves, which would be the first year since 2005 that’s happened. In the S&P 500's nine decades, it’s only had ten years without a 2 percent move.

That hasn’t stopped stocks from notching significant gains in 2017. The S&P 500's 19 percent rise so far this year is on pace for its biggest annual increase since 2013.

The Much-Expected Rate Hike

As was expected, the Federal Reserve yesterday raised its benchmark federal-funds rate by a quarter percentage point to between 1.25 percent and 1.5 percent—its fourth increase in a year. Senior officials also stuck to their earlier projections of three rate increases in 2018.

The S&P 500 fell slightly, by less than 0.1 percent, putting an end to a four-day rise in the benchmark index. Financial stocks were the big losers of the day, with the sector slumping 1.3 percent. Only two of the 67 components of the Financial Select Sector SPDR ETF ended in positive territory, according to FactSet data.

Why did this happen, when the financial sector tends to outperform in periods of higher interest rates? Because the rate hike was such a non-surprise. The financial sector had already risen in anticipation of the Fed meeting, increasing by 6.7 percent over the past month.

The Stubborn Hiring Rate

The unemployment rate has fallen to a 17-year low, remaining at 4.1 percent for two consecutive months now. But for some reason, the rate at which employers are hiring new workers has yet to break out.

The hiring rate, or the share of newly filled jobs to total employment, has remained remarkably steady for three and a half years. The rate improved to 3.8 percent in October from 3.6 percent in September, the Labor Department said yesterday. That increase matched a post-recession high achieved three previous times since late 2015, but the figure has yet to match pre-recession peaks.

The hiring rate has held in the fairly narrow range between 3.5 percent and 3.8 percent since April 2014. Like the hiring rate, growth in average hourly earnings has also been stuck in neutral for about three years.

What to Expect From the Fed

Federal Reserve officials will meet today and tomorrow to update the nation's monetary policy. They'll make an announcement after the conclusion of the meeting tomorrow, and the markets see a rate hike as a done deal.

At 2 p.m. tomorrow afternoon, the Fed will release a policy statement, revised economic forecasts and “dot plot” projections of future rate hikes. Fed Chairwoman Janet Yellen will hold what is likely to be her final press conference immediately afterward.

A Fed rate hike later that day appears all but certain, with Fed fund futures markets giving the move 90 percent odds. It would be the Fed’s third quarter-point bump this year, raising the Fed funds rate to a range of 1.25 percent to 1.5 percent.

The Good News from Retirement Past

Everyone is nervous about how long their retirement savings will last. But looking back at previous decades, the nest eggs of past retirees were remarkably resilient, so much so that for many in their golden years, investment returns on retirement savings outpaced drawn down rates.

According to analysis from the BlackRock Retirement Institute, retirees who began leaving the workforce in the early 1990s were able to preserve the vast majority of their savings throughout retirement. Using data from the Employee Benefits Research Institute, BlackRock’s analysis shows that the wealthiest households held 83 percent of their savings nearly two decades after retirement.

Savers in the median wealth bracket retained 77 percent of retirement savings, and those in the lowest wealth bracket retained 80 percent. However, many of these were pension plans, which are now down to 2 percent of all retirement savings plans.

November's Jobs Report

The economy was strong again in November, adding 228,000 jobs, according to the report out from the Bureau of Labor Statistics this morning. The unemployment rate was 4.1 percent, unchanged from Octoberr; it remains the lowest it's been since 2000.

This is the 86th consecutive month employers added to payrolls. Employment growth has averaged 174,000 per month thus far this year, compared with an average monthly gain of 187,000 in 2016.

One strong sign is the quality of jobs being added. Employment in professional and business services continued on an upward trend in November, with 46,000 new jobs. Over the past 12 months, the industry has added 548,000 jobs.

The Four-Day Losing Streak

The S&P 50 index declined yesterday. Sure it was just by a minuscule 0.01 percent, but it was nevertheless the fourth straight day that the index had lost ground. 

We haven't seen much of that recently: The market had gone nine months without such a streak. Four-day down streaks haven’t been particularly common in recent years – there were only three such streaks last year, and none at all in 2014.

But there's not much reason for concern yet. The index has had three streaks this year where it’s dropped four days in a row, and this one had the smallest percentage decline of the three. Even with the dropoff, the S&P 500 is just about 0.7 percent off its record high from November 30. 

What Makes a Great Boss?

What makes people get frustrated about their jobs? A new survey from Ultimate Software and The Center for Generational Kinetics, shows that managers and employees aren’t always on the same page when it comes to their relationship.

The overwhelming majority—80 percent—of employees surveyed think they could do their job without managers and deem them unnecessary. The survey found that 75 percent of employees say that approachability is the most important quality in an effective manager today, but only 5 out of 10 employees say they have an approachable manager.

But when a work relationship clicks, it really works. More than half of employees say they’d turn down a 10 percent pay increase to stay with a great boss.

Recession Still Haunting Americans

A decade after the Great Recession, Americans claim that the event had no impact on their lives. But their spending and investing behaviors tell a different story, according to a new survey from Hartford Funds.

According to the survey of 1,006 American adults, 40 percent of respondents said that the financial crisis had no impact on their lives. However, the survey also found that large numbers reported that they avoid the market (42 percent) and have altered their spending and savings habits (46 percent).

The survey also addresses millennials, whose formative years were rocked by the crisis, and finds they have the least amount of trust in the market today. According to the survey, almost half of this age group avoid the market altogether.

Waiting for Santa Claus

As we head into December, it's worth noting that, on average, it's the best month for stocks. Investors call the gains a Santa Claus rally: a late-year boost that helps the markets end on a high note. Over the past 1000 years, the Dow Jones Industrial Average has gained 74 percent of the time over the past 100 years in December for an average return of 1.6 percent.

From 1950 to 2016, the Standard & Poor's 500 index rose an average of 1.6 percent in December. And its strong performance so far this year augurs well for 2017's Santa Claus rally.

With double digit gains so far, the S&P 500 is poised for one of its best years since 2013. Since 1990, the S&P 500 has climbed 82 percent of the time in December, with an average gain of 2.5 percent, when the index has risen at least 10 percent by the end of November.

Another Streak for the S&P

The month of November came to a close yesterday, and with it the S&P 500 index set yet another record. On a total-return basis that includes dividends, the index rose 2.2 percent over the course of November, extending its string of monthly advances to a record 13.

The previous streak, according to Dow Jones data, was a 10-month rally that ended in September 1995. Over the entire 13-month period, the S&P has risen 26.3 percent on a total-return basis.

Remember, this includes dividends. On a purely price basis, the S&P 500 has risen in only 12 of the past 13 months. In March of this year, the index fell by 0.04 percent on a pure price basis.

The Tech Slide

It was a rough day for technology on the stock market yesterday. While the S&P 500 was little changed, the stocks in the tech sector plunged 2.7 percent and at one point was on pace for its steepest decline of the year.

The biggest names got the worst of it. Facebook dropped 3.7 percent, and Netflix fell 5.4 percent. Chip-maker Nvidia — one of the hottest heavyweight stocks this year — fell by more than 7 percent.

If there's a silver lining, it's that yesterday wasn’t the first time that tech and internet stocks suddenly plunged. In June, Apple and Amazon.com were hit for 3.9 percent and 3.2 percent one-day losses, respectively, but they rebounded nicely.

Daunting Debt in Retirement

Older persons today appear more likely to enter retirement in debt than in past decades, according to a working paper from the National Bureau of Economic Research. The percentage of people age 56 to 61 arriving at retirement with debt rose from 64 percent, for those born from 1931 to 1941, to 71 percent, among those born from 1948 to 1953.

Additionally, the value of debt held rose sharply over time. While the median amount of debt in the 1931-1941 group was about $6,800, it more than quadrupled among war babies born between 1942 and 1947, and almost quintupled among the 1948-1953 group.

The paper also finds that the debt distribution appears to have changed across cohorts. In the oldest group, the top quartile of the debt distribution held around $51,000 in debt. But for the two younger cohorts, this same quartile of the population held more than double ($106,000) and almost triple ($146,800) that amount.

The Declining State of Retirement

New data reported from the journal Health Affairs suggests that older Americans have more serious health problems than they used to, making it more difficult to enjoy retirement at an increasing age. The data shows that Americans in their late 50s have more serious health issues than folks the same age did 10 to 15 years ago.

The Health Affairs article looked at survey data to compare the health of older Americans using ADL (activity of daily living) measures. ADL limitations include actions like walking across a room, self-dressing, self-bathing, feeding oneself and getting into or out of bed. The number of Americans with these limitations rose from 8.8 percent of people who have a retirement age of 65 to 12.5 percent of people at the current retirement age of 66.

The study looked at cognitive health, too. Eleven percent of Americans set to retire at 66 already showed signs of cognitive decline or dementia at age 58 to 60, which is up from 9.5 percent from Americans with a retirement age of 65 to 66.

What's Going On with TIPS?

In a surprising development, mutual funds and exchange-traded funds targeting inflation-protected Treasurys, known as TIPS, pulled in $1.2 billion in the week ended Wednesday. That represented the largest draw since November 2016 and was the third-largest weekly inflow on record.

That burst of TIPS fund buying contrasts with recent inflation readings. The Labor Department’s consumer-price index rose 2 percent in October from a year earlier while the Fed’s preferred measure of inflation rose 1.6 percent in September from a year earlier, well below the central bank’s 2 percent target.

The 10-year break-even rate—the yield premium investors demand to hold the 10-year Treasury note relative to the 10-year TIPS—was 1.87 percent at the end of last week. That's been pretty steady over the past three months.

A Big Black Friday Weekend

The biggest shopping weekend of the year has arrived, and 69 percent of Americans — an estimated 164 million people — are planning to shop or considering shopping during Thanksgiving weekend, That's according to the annual survey released this week by the National Retail Federation.

Of those considering shopping the long holiday weekend, the survey found that 20 percent planned to shop on Thanksgiving Day (32 million), but Black Friday will remain the busiest day with 70 percent planning to shop today (115 million). A substantial 43 percent are expected to shop on Saturday (71 million), with 76 percent saying they will do so specifically to support Small Business Saturday. On Sunday, 21 percent expect to shop (35 million), and 48 percent are expected to shop on Cyber Monday (78 million).

Of those shopping, 66 percent said they’re doing so to take advantage of deals and promotions retailers will offer, while 26 percent cited the tradition of shopping over Thanksgiving weekend. Another 23 percent simply said that it’s something to do over the holiday weekend.

Thoughts for Thanksgiving

"Thanksgiving, after all, is a word of action." ~ W.J. Cameron

An optimist is a person who starts a new diet on Thanksgiving Day. ~ Irv Kupcinet

"The unthankful heart discovers no mercies; but the thankful heart will find, in every hour, some heavenly blessings." ~ Henry Ward Beecher

Thanksgiving Spending

Between buying the turkey and stuffing, travel costs, and finding just the right bottle of wine, Thanksgiving is getting to be an expensive holiday. A new survey from LendEDU finds that the average American will spend a total of $165.14 this year on Thanksgiving expenses.

Travel makes up a sizable part of that, but it’s not the majority. The site, which surveyed 1,000 people about their expected costs, says travel expenses make up $67.59 of that amount, with the rest going for food, wine, and other expenses.

The real winners at this time of the year are the nation’s turkey farmers. LendEDU calculates there are 254 million turkeys raised in the U.S. each year, with a total value of $4.85 billion - and 36 million of those turkeys are eaten at Thanksgiving.

Good News for Borrowers

Americans’ access to credit continues to improve, according to a new Federal Reserve Bank of New York survey. The so-called survey of consumer expectations found that respondents who were too discouraged to apply for credit over the past 12 months declined to 4.9 percent in October, reaching its lowest level since the survey began in 2013.

The survey, done every four months, focuses on mortgages and refinancing, credit cards and limit increases, and auto loans. The most recent one found a rise in those applying for and accessing credit for such things, and a drop in rejections. 

The New York Fed also updated its gauge of so-called financial fragility. While the average probability of respondents needing $2,000 for an unexpected expense in the next month rose to 33 percent, from 32 percent previously, the probability of being able to come up with the funds also rose to nearly 70 percent, from 67 percent.

From a Century Ago

The largest stock in America is now Apple, with nearly $900 billion in market capitalization. The MarketWatch web site recently ran a list of the biggest stocks of 100 years ago; here's what the market looked like in 2017:

1. U.S. Steel, $46.4 billion
2. AT&T, $14.1 billion
3. Standard Oil of New Jersey, $10.7 billion
4. Bethlehem Steel, $7.1 billion
5. Armour, $5.8 billion
6. Swift, $5.7 billion
7. International Harvester, $4.9 billion
8. duPont, $4.9 billion
9. Midvale Steel, $4.8 billion
10. U.S. Rubber, $4.6 billion

The High Cost of Working

Employees have some pretty major priorities when it comes to objectives outside their work, and after saving for retirement, the ones that top the list are work-life balance and becoming fit and healthy. That's the good news, says the Global Employee Benefits Watch 2017/18 study from Thomsons Online Benefits.

The bad news is that the survey reveals most employees—64 percent—feel that their employer and workplace are having a negative or very negative impact on their wellbeing. Survey respondents also said that they want employers’ support for their broader needs beyond salary and retirement plans, such as buying a home or financial management.

But they’re not feeling all that supported by employers. Some 63 percent said that one of their life’s goals is getting fit and staying healthy, but only 30 percent said their employer was helping that effort through a benefits program.

Two Ways for Auto Loans

One area of the credit arena that continues to grow is vehicle lending. Auto loans have grown for 26 straight quarters, a New York Federal Reserve report out Tuesday showed, even though delinquency rates are also up.

Banks and traditional lenders have been largely limiting their borrowing to higher-rated customers, even as the U.S. job picture remains upbeat. But their nonbank competition—mostly the financial arms of the auto manufacturers themselves or lenders that operate from a “captive” position as part of the dealerships—have taken a different tack.

Almost 10 percent of subprime car loans made by nonbank lenders were more than 90 days past due in the third quarter, the highest rate in more than seven years, according to the New York Fed’s quarterly report. That’s more than double the 4.4 percent delinquency rate for subprime loans made by traditional banks, a number that’s largely improved since the end of the financial crisis.

The Disappearing GE

The behemoths of the stock market are now the high-tech FAANG stocks, so what's happened to the old warhorses? Ten years ago, General Electric was the second largest company in the S&P 500 behind only Exxon Mobil. It’s still larger than 93 percent of the stocks in the S&P 500, but it ranks 33rd at this point.

General Electric still has a market cap of $153.6 billion, but in the past ten years, the company has lost $240.7 billion in value. Meanwhile, over the same ten years, three of the four largest stocks right now have each added more than $500 billion.  Facebook has also added $500 billion in market cap, given that it wasn’t even public ten years ago and it now has a market cap of $521 billion.

Had someone told you in 2007 that the S&P 500 would be up 80 percent ten years from now, you would have certainly expected GE to be leading the way and adding to its market cap. Instead, this old warhorse has lost $240 billion.

Inside the Retail Bust

One of the biggest economic stories of this yaer continues to be the retail bust. Through the third quarter of this year, 6,752 locations were scheduled to shutter in the U.S., excluding grocery stores and restaurants, according to the International Council of Shopping Centers. That's more than double the 2016 total and is close to surpassing the all-time high of 6,900 in 2008, during the depths of the financial crisis.

Apparel chains have by far taken the biggest hit, with 2,500 locations closing. Department stores were hammered, too, with Macy’s Inc., Sears Holdings Corp. and J.C. Penney Co. downsizing. In all, about 550 department stores closed, equating to 43 million square feet, or about half the nation's total.

Making matters more difficult is the explosive amount of risky debt owed by retail coming due over the next five years. Just $100 million of high-yield retail borrowings were set to mature this year, but that will increase to $1.9 billion in 2018, according to Fitch Ratings. And from 2019 to 2025, it will balloon to an annual average of almost $5 billion.

Hard Times for American Retirees

Getting old in America isn’t what it used to be. In a worldwide study, the U.S. has fallen to No. 17, down three spots from last year, in its ability to offer its citizens a secure retirement. The Natixis Global Asset Management Global Retirement Index ranks 43 mainly developed countries on this score.

Why did the U.S. have such a dismal showing? We took hits in income equality, health care spending and life expectancy. While America may have the fifth-highest income per capita, we have the sixth lowest score for income equality, suggesting that retirement saving is difficult for average workers. Our life expectancy fell, yet we spend the most on health care compared to the other countries analyzed in the index.

A big part of the problem is demographics. Overall, we are living longer — and that’s not necessarily a good thing for retirement planning. About half of the people born today in the developed world are expected to live past the age of 100, up from a global average life expectancy of 71 currently.

The Giving Season

We're entering the giving season, and 45 percent of experienced donors in a new survey said they expected to increase their charitable giving this year. Only 7 percent expected to give less than last year, according to Exponent Philanthropy, an association of some 2,000 funders.

This is truly the charitable time of year: Thirty-two percent of survey respondents said they would give at least half of their full annual contribution during the last two months of the year. An additional 27 percent they would give between 26 percent and 50 percent in November and December.

The survey also asked which factors contributed to their 2017 giving decisions. Among the most important:

•   Community needs: 43 percent
•   Market performance: 31 percent
•   Desire to maximize impact: 28 percent

The Biggest Surprises

One thing most investors keep a keen eye on during earnings season is those companies reporting a surprise - earnings well above or below what Wall Street expects. Here are the five biggest surprises of this season:

• SL Green Realty Consensus earnings: -4 cents per share, actual earnings: 40 cents per share
• EQT Corp. Consensus earnings: -3 cents per share, actual earnings: 12 cents per share
• Apache Corp. Consensus earnings: -2 cents per share, actual earnings: 4 cents per share
• Vornado Realty Trust Consensus earnings: 3 cents per share, actual earnings: 36 cents per share
• Amazon.com Consensus earnings: 7 cents per share, actual earnings: 52 cents per share

And the top five surprises on the downside:

• Brighthouse Financial Consensus earnings: $2.14 per share, actual earnings: -$5.64 per share
• Digital Realty Trust Consensus earnings: 36 cents per share, actual earnings: -2 cents per share
• HCP Inc. Consensus earnings: 15 cents per share, actual earnings: -2 cents per share
• Mattel Consensus earnings: 57 cents per share, actual earnings: 9 cents per share
• Charter Communications Consensus earnings: 98 cents per share, actual earnings: 19 cents per share

The High Cost of Caregiving

Caring for the elderly usually means caring for their finances as well. A new Merrill Lynch study finds that 92 percent of caregivers say they are also financial caregivers, performing at least one aspect of financial caregiving during their caregiving journey. After two years of receiving care, 88 perent of care recipients are no longer managing their finances independently.

The report finds that financial caregivers are responsible for a wide variety of tasks. The most common include: paying bills from their recipient’s account (65 percent), monitoring bank accounts (53 percent), handling insurance claims (47 percent), filing taxes (41 percent), and managing invested assets (21 percent).

According to the report, caregivers on average spend $7,000 on caregiving per year, which goes toward paying for personal, medical and household needs. But it can be higher than that: Caregivers for people with Alzheimer’s and other forms of dementia spend, on average, 54 percent more than the average caregiver.

The Case for Optimism

Wall Street’s earnings forecasts are holding up better than they have in years. Analysts usually start out the year too optimistic, but they have cut their full-year earnings estimates for S&P 500 companies by only 1.5 percent so far this year, the smallest downward revision since 2011.

By this time last year, earnings forecasts had come down by roughly 7 percent, according to FactSet data. All told, analysts now see per-share earnings for S&P companies rising roughly 10 percent in 2017 from a year earlier, FactSet reports.

Tech remains a huge driver of that. Analysts are now expecting tech-sector profits will rise 14 percent this year, compared to expectations for an 11 percent increase a month ago. The double-digit earnings growth for the sector accounts for more than 20 percent of the S&P’s overall market value.

2017's Tech Blowout

Last week, the Nasdaq marked its 63rd record close of 2017, surpassing the previous record of 62 all-time closing highs in a calendar year rung up in 1980. All three main benchmark stock indexes closed at records at the same time for the 25th time this year, tying a record for the calendar-year trifecta set in 1995.

So far this year, the Nasdaq has far outperformed the other main equity gauges. The index has risen nearly 26 percent in 2017, compared with a gain of nearly 16 percent for the S&P 500 index and 19 percent for the Dow.

The story of 2017 is tech stocks. The S&P 500 was up 2.3 percent in October, its best month since February, but technology accounted for 75 percent of that gain. Without tech, the S&P would have been up roughly 0.5 percent.

October's Jobs Report Bounces Back

Following on the heels of a very disappointing September, total nonfarm payroll employment rose by 261,000 in October, the U.S. Bureau of Labor Statistics reported this morning. The unemployment rate ticked down to 4.1 percent, reaching its lowest level since December 2000.

Employment in food services and drinking places increased sharply, mostly offsetting a decline in September that reflected the impact of Hurricanes Irma and Harvey. In October, food services and drinking places added 89,000 workers, after a decrease of 98,000 in September, when workers were cut because of the hurricanes.

In addition, September’s payrolls data, initially reported as the first drop in seven years, were revised to show employers actually created 18,000 new jobs that month, extending the economy’s streak of job gains to a record 85 straight months. When combined with August and September’s job growth, the economy added jobs over the last three months at a pace of 162,000 a month.

The Fed Speaks

As expected, the Federal Reserve announced yesterday it was leaving interest rates unchanged, in a range of 1 percent to 1.25 percent. However, 12 out of 16 Fed officials have penciled in a December rate hike in the so-called dot-plot, a projection of where Fed members see rates in the future.

The Fed also said that economic activity was on the rise, and that recent hurricanes shouldn't have long-term effects. "Although the hurricanes caused a drop in payroll employment in September, the unemployment rate declined further," the Federal Open Market Committee said. "Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters."

The Fed noted that inflation remained soft and below its 2 percent objective, despite the fact that gas prices rose after the hurricanes. Its preferred inflation gauge, personal consumption expenditures, excludes food and energy prices, and that figure rose just 1.3 percent in September.

Confidence Highest in 17 Years

Americans' confidence is soaring: Consumer confidence for the month of October surged to the highest level since December 2000.  The month's overall reading rose to 125.9, a tick above the previous high set in March. 

The share of respondents who say jobs are plentiful rose to 36.3 percent, the most since June 2001. People reporting good business conditions increased to 34.5 percent, matching the highest since 2001.

Consumers aren’t as optimistic about the future as they are about the present, however.  When it comes to the present, consumers haven’t been this optimistic since July 2001, with a reading of 151.1.  When it comes to the future, though, the number is just 109.1, and confidence levels still have yet to surpass the recent highs from last March.

Halloween Is Boo-ming

Happy Halloween! It should be a fun one, given that candy sales are expected to rise 4.1 percent from last year, reaching $4.1 billion, according to data from IHS Markit. The sales increase is particularly impressive given that candy prices have dropped 0.9 percent compared with last year, marking the second consecutive Halloween candy price decline.

The National Retail Federation, which surveyed more than 7,000 consumers, estimates more than 179 million Americans will be participating in some type of Halloween festivities. That's up from 171 million last year.

Those figures mean this will be a lucrative holiday for retailers. By the trade group's calculations, this year's total Halloween spending - for costumes, cards, decorations, candy and more - will end up hitting a record $9.1 billion, up from $8.4 billion in 2016.

The Top-Heavy Market

So far in 2017, the five largest companies in the S&P 500 index — all high-tech giants — have added close to a trillion dollars in market capitalization. The remaining 495 stocks have added roughly $2 trillion. This means the five largest stocks have accounted for a third of the 2017 gains in market cap for the entire S&P 500.

Apple remains in the lead as the largest public company in the world by more than $100 billion in market cap, but Google's parent company Alphabet, the second biggest, is now worth $724 billion. That makes it larger than any company not named Apple has ever been.

The third, fourth, and fifth largest companies in the S&P are Microsoft, Amazon and Facebook. Those companies are now all worth more than $500 billion as well.

Going Out of Business

How bad has the retail business been this year? More store closings have been announced in 2017 than any other year on record. Since January 1, retailers have announced plans to shutter more than 6,700 stores in the U.S., according to Fung Global Retail & Technology, a retail think tank.

That beats the previous all-time high of 6,163 store closings, which happened in 2008 amid the financial meltdown. It's going to get worse: As many as 8,600 brick-and-mortar stores are expected to close this year.

Walgreens helped bring this year's tally to a new high when it said this week that it plans to close about 600 locations. Other chains that have announced big batches of store closings this year include Kmart, Sears, JCPenney, Ann Taylor, Gap, Banana Republic, Gymboree, Teavana, Michael Kors, Bebe, Perfumania, The Limited, and Staples.

The Coming Flood of Health Care Jobs

Where are the jobs going to come from in the next decade? Health care. Health-related jobs in areas such as home health care and hospitals will grow by about 3.7 million jobs by 2026, according to a report released Tuesday by the Labor Department.

Health care spending reached $3.2 trillion in 2015, almost 18 percent of gross domestic product that year. That means it has more than tripled since 1960, when spending on health care was just 5 percent of GDP.

Meanwhile, jobs related to manufacturing will decline by almost half a million over that same decade. The Labor Department says that each recession since 1979 has wiped out a substantial number of manufacturing jobs, erasing about 8 million jobs in almost four decades.

The Trouble With Growing Bond Numbers

The corporate bond market is booming. High-grade companies, excluding financial institutions, have issued nearly $712 billion in bonds so far this year, the most ever for a comparable period, according to Dealogic records going back to 1995.

Though monthly debt sales have slowed a bit since companies issued $102.4 billion in May, the most for any month this year, the market has remained strong. In the most recent sizable issuances, Northrop Grumman issued $8.3 billion this month, and Wal-Mart issued $6 billion.

The increased indebtedness has led some to suggest that more heavily indebted or lower-rated companies could run into trouble if the Fed raises interest rates. Strategists at BlackRock said this week that they were downgrading their outlook on U.S. credit to neutral, from overweight, citing high prices that could limit bond investors' returns going forward.

The Best Earnings Beaters

LogMeIn, a cloud-based software company that reports earnings this week, has incredibly beaten earnings estimates for 32 consecutive quarters. The stock has averaged a gain of more than 5 percent on the first day that it trades after quarterly earnings. 

There are other stocks that have come close to LogMeIn's record. Among the stocks beating estimates most often in recent years:

• Columbia Sportswear, 96.9 percent
• Lockheed-Martin, 96.9 percent
• Mettler-Toledo, 95.9 percent
• Silicon Labs, 95.3 percent
• Visa, 94.7 percent

Mixed Signals on Investor Confidence

Stock market participants' confidence is reaching historic highs, according to data from the University of Michigan consumer sentiment report, which asks about the probability of an increase in stock prices over the coming year. Currently, about 65 percent of respondents see such an increase in the offing, arguably the best reading in the survey's history.

It isn’t just retail investors feeling good about the market. According to the Bank of America-Merrill Lynch fund manager survey, the average cash balance in portfolios has fallen to 4.7 percent, the lowest level since May 2015.

The Michigan survey can be read as something of a contrarian indicator, however, since the previous record high came in early 2016, shortly before the market’s most recent pronounced pullback. The lowest-ever reading recorded by the survey—which goes back to 2002—occurred in 2009, around the financial crisis bottom, which marked the start of an uptrend that is still ongoing.

Microsoft Hits the Heights

After 17 years, Microsoft is returning to its tech-bubble peak. The software giant closed with a market value of $600 billion yesterday for the first time since January 2000, according to the Journal’s Market Data Group. Shares rose to $77.91, setting an all-time share price high.

For the year, Microsoft shares are already up 25 percent. That puts them on track to have their best year since 2013. Most observers attribute the rebirth of Microsoft to its growth in the cloud-computing space.

The firm is the third-largest S&P 500 company in market value, trailing Apple (about $800 billion)and Google’s parent company, Alphabet (about $690 billion). In July,  Facebook and Amazon.com joined the trio as the only U.S.-listed companies valued at more than the $500 billion.

Remembering Black Monday

Thirty years ago, on October 19, 1987, the stock market experienced what became known as Black Monday, when the Dow Jones industrial average experienced its largest percentage single-day drop ever, losing 22.6 percent of its value. Some other facts about that day:

• The market as a whole lost roughly $1 trillion in value on Black Monday
• The crash came after a two-week period in which the Dow had already dropped 15 percent
• The 604 million shares traded nearly doubled the previous record for volume
• The Dow's second-worst percentage loss was just 7.9 percent, on October 15, 2008 
• The Dow did not surpass its pre-Black Monday level until January 1989

Savvy New Jersey

What's the most financially savvy state? It's not New Jersey, which comes in at Number Five, according to a new survey from WalletHub. It's Massachusetts, followed by New Hampshire and Connecticut.

But New Jersey’s overall score was good enough to get it into fifth place. It ranked second for the lowest total debt as a percentage of median income and for the lowest percentage of credit usage, as well as in the top five in the categories of debt and spending, and saving.

When it came to financial literacy and credit, our state didn’t do anywhere near as well, though, with ranks of 16 and 27, respectively. And it was tied for 50th place for the highest foreclosure rate in the country.

The Optimism of Older Americans

Older Americans’ cheeriness about the U.S. economy is increasing at a swift clip, but younger folks aren’t feeling quite so optimistic. Beginning in September 2016, U.S. consumer sentiment as measured by the University of Michigan has climbed year-over-year each month for Americans age 55 and over, growing as much as 19 percent in April from the comparable year-ago period.

Though it has moderated since, sentiment growth for this age bracket still starkly contrasts with that of younger Americans, where growth has been negative for more than a year. Confidence among younger people slipped slightly in the October reading.

Going back decades, consumer surveys have shown Americans in their 20s and 30s more optimistic about the economy compared with their parents and grandparents. What's changed now? One factor in older Americans’ buoyant enthusiasm could be the wealth effect, as stock portfolios and retirement savings have soared.

The Cost of Retiring in New Jersey

Do you have a million dollars saved for retirement? If so, the data research firm HowMuch calculates that will last you 17 years and ten months here in New Jersey. That's eighth from the bottom among the 50 states.

A million dollars will last you the longest in Mississippi, where it would allow you to maintain your lifestyle through 25 years and six months. It would last the shortest in Hawaii, at 13 years and one month.

The figures were based on the cost of living index in each state for the second quarter of 2017, as well as the average annual expenditures of people over 65. The cost of living in New Jersey is among the highest in the nation - it's higher in only six other states.

The Big Test in College Savings

The good news is that an increasing number of families are saving for their kids’ college education. The bad news, according to Fidelity Investments’ latest College Savings IQ survey of almost 2,000 parents nationwide, is that many are likely not saving nearly enough.

A record 72 percent of families have opened college savings accounts, but many families are underestimating the cost of college. Parents of high schoolers, for example, are expecting a four-year nonprofit private college education will cost $145,000 on average. But the projected sticker price is close to $220,000.

Parents saving for college with a 529 plan reported an average balance of $32,000 saved, almost 50 percent more than parents saving without a 529 plan. Parents working with a financial advisor also reported saving more for college than those who didn’t have an advisor — $14,000 more, according to the Fidelity survey.

Workers Are Staying Put

Despite the low unemployment rate, workers are no more likely to leave their jobs than they were two years ago, according to the Labor Department’s new Job Openings and Labor Turnover Survey, or JOLTS. The rate at which workers quit their jobs—seen by many economists as a sign of confidence in the labor market—fell slightly to 2.1 percent in August from 2.2 percent in July.

The quits rate, or the share of employed people who voluntarily leave their jobs in a month, has held nearly steady for two years after slowly climbing following the end of the recession in mid-2009. The sideways move in the quits rate comes at a time when the unemployment rate has fallen to a 16-year low and the number of available jobs has touched the highest level on records back to 2000.

The number of job openings in the U.S. slipped slightly in August from July’s record high, but was the third highest monthly level on record. There were 6.08 million seasonally adjusted openings during the month, down from 6.14 million in July.

Expectations of Inflation

Are consumers and investors starting to believe inflation will rise? A September survey by the Federal Reserve Bank of New York, released yesterday, shows consumers expect annual inflation will be at 2.8 percent three years from now. That's up from 2.6 percent in the previous reading, and is the highest level since April.

Another survey of inflation expectations for the next year, from the University of Michigan, climbed to 2.7 percent last month, from 2.6 percent a month earlier. In the bond market, the differential between nominal and inflation-adjusted Treasury yields, known as breakevens, show expected annual inflation of 1.89 percent over the next 10 years, up from less than 1.7 percent in June.

But this inflation hasn't started up yet. The Fed’s preferred measure of inflation, the personal consumption expenditures price index, was up 1.4 percent from a year earlier in August.

Bullish on Earnings Season

Quarterly earnings season kicks off this week, and according to FactSet, it should be a strong one. Earnings for S&P 500 companies are seen coming in at $32.34 a share in the third quarter. That represents growth of 2.8 percent from a year ago. Sales are seen rising 4.8 percent compared with the third quarter of 2016.

J.P. Morgan Chase & Co. is even more bullish on the coming season. Their recent reports indicate that the overall earnings per share growth rate could be more than three times that of current consensus expectations.

But these forecasts have dimmed in recent months. Profit expectations have dropped 4.2 percent since the end of June, when earnings were seen coming in at $33.76 a share, according to FactSet.

The Surprising Trend in Small Caps

The S&P 500 index of large-cap stocks is up 14 percent year to date, and has been climbing the entire year, supported by solid earnings growth. The small-cap Russell 2000 index is up just 11 percent year to date - but it's catching up to the big boys.

More than half of that gain, or 6 percent, came in September. The small-cap index rose even as earnings picture for the sector deteriorated, with analysts penciling in a decline in earnings for the third quarter. What is most surprising, though, is what kind of smaller companies have rallied so far this year - primarily those of lower quality.

According to WisdomTree, the Russell 2000’s non-dividend payers returned 18.7 percent year-to-date. Shares of companies with negative earnings returned 21.7 percent, and the companies in the lowest return-on-equity quartile returned 22.7 percent - twice the return of the underlying index.

September's Jobs Report

The U.S. economy lost 33,000 jobs in September, primarily due to the effects of hurricanes Harvey and Irma, the Bureau of Labor Statistics reported this morning. Nevertheless, the headline unemployment rate dropped to 4.2 percent, the lowest that number has been since 2000.

This was the first month in which the economy shedded jobs in seven years. On top of that, revisions to the employment numbers from July and August reduced the number of jobs added in those months by an additional 38,000.

The net loss of jobs is expected to be a temporary blip. For comparison, payroll gains had averaged 249,000 in the six months before Hurricane Katrina at the end of August in 2005. After the storm struck New Orleans, employment gains averaged 76,000 over the next couple of months before rebounding strongly to 341,000 in November 2005.

Where Our Area Gives

Fidelity Charitable recently came out with a fascinating study of Americans' charitable giving, looking at what charities people in different metropolitan areas are most likely to support. The New York/Northern New Jersey area ranked near the top of many of the lists, ranking number one in one area: People from around here are most likely to give to international affairs organizations.

Other areas of giving where we rank highly:

• Society Benefit (including civil rights, community improvement, social advocacy and volunteer organizations): 2nd
• Education: 4th
• Health: 5th
• Arts and Culture: 6th
• Human Services (nonprofits that provide basic, daily care including food banks, homeless shelters and youth programs): 10th

Auto Sales Bounce Back

Led by strong truck and SUV sales and the replacement of cars destroyed by Hurricane Harvey in Texas, the auto industry posted its first monthly sales gain of the year in September. U.S. sales rose 6.1 percent to a total of just over 1.5 million vehicles.

Of the major automakers, only Fiat Chrysler and Hyundai reported sales declines. GM reported that sales rose 11.9 percent from a year ago, while Ford sales rose 8.7 percent. Toyota posted a 14.9 percent increase, Nissan sales were up 9.5 percent, and Honda sales rose 6.8 percent. Volkswagen said its sales rose 33.2 percent over numbers that were depressed a year ago by its diesel emissions cheating scandal.

Industry analysts expect sales to be strong through the end of the year, fueled by customers whose cars were destroyed by Harvey and Hurricane Irma in Florida. But that's not expected to be enough to match last year's record number of more than 17.5 million cars sold.

Third Quarter Scorecard

The third quarter of 2017 is now in the books, and it was a strong quarter for investors, in what is also shaping up as a very strong year.  Here's a scorecard for the major indexes:

• S&P 500 up 4.4% in the third quarter, up 14.0% year to date
• Dow Jones Industrial Average up 5.6% in the third quarter, up 15.3% year to date
• Nasdaq up 5.9% in the third quarter, up 23.6% year to date
• S&P Midcap 400 up 3.2% in the third quarter, up 9.3% year to date
• S&P Smallcap 600 up 6.2% in the third quarter, up 9.0% year to date

An Upgrade to Second Quarter Growth

The U.S. economy’s pace of growth in the second quarter was raised to 3.1 percent from 3 percent on Friday. According to the final revisions from the federal government, the U.S. expanded in the second quarter at the fastest clip in two years.

The U.S. is on track to grow slightly faster than 2 percent in 2017, keeping in line with growth trends since the end of the Great Recession. The somewhat stronger pace of growth in the spring mostly reflects higher farmer inventories. The production of unsold goods such as crops or new cars adds to GDP, and the value of inventories rose by $5.5 billion, stronger than previously reported.

Other key figures in the government’s third estimate of GDP, including readings on inflation, were little changed. The increase in consumer spending, considered the largest driver of economic growth, was unchanged at 3.3 percent.

The Latest Employee Benefit

The fallout from the Equifax breach has led a lot of people to wonder just how secure their persona financial information is. As a result of that and an economy nearing full employment, one of the benefits more employers are offering to their employees is identity theft protection, according to IdentityForce’s 2017 Progressive Benefits Survey.

The survey found that more than two-thirds (68 percent) of HR professionals consider identity theft protection an increasingly important employee benefit. But only half currently offer identity theft protection to their employees.

When asked what their organization would expect to gain by offering identity theft protection in addition to offering more attractive benefits, they said they would provide an extra layer of protection in case of a data breach or cyber attack (56 percent); reduce stress and distractions in the workplace (37 percent); improve recruiting and retention efforts (22 percent) and attract millennials, (22 percent). Just over a tenth (12 percent) say they have no plans and no expectations around this.

The Potential Generosity of Millennials

The idealism of the millennial generation shines brightly in Personal Capital’s latest survey of affluent families. The online survey of just over 1,000 affluent investors, 18 or older with assets of $500,000 or more, found that millennials with children plan to spend more on their children’s college education and home purchases than older generations.

They’re three times as likely to say they will cover the entire cost of their kid’s home purchase, and twice as likely to contribute a full down payment compared with parents overall. Moreover, 70 percent say they would prioritize saving for their kid’s education over saving for their own retirement. In comparison, just under 50 percent of parents overall say they would adopt that strategy.

The survey also found that among all affluent parents, close to one-fifth plan to support their children into their 30s, 12 percent plan to continue that into their 40s and 97 percent plan to leave an inheritance to their children. Just over 90 percent plan on leaving $100,000 or more to their heirs.

The Top Ten of... Next Year?

Most investors would love to know which companies are going to have the strongest earnings next year. Goldman Sachs has made its projections, and sees the following as the top ten earnings growers for 2018:

1. Oil and gas production company EQT Corp., projected up  74 percent
2. Chemical company FMC Corp., up 63 percent
3. Retailer Coach Inc., up 31 percent
4. Facebook, up 30 percent
5. Aerospace and defense company Rockwell Collins, up 28 percent
6. Software firm Autodesk, up 25 percent
7. Amazon.com, up 23 percent
8. Oil and gas production company Concho Resources, up 23 percent
9. Netflix, up 22 percent
10. Electronic production equipment company Lam Research Corp., up 22 percent

The Lure of Bond Funds

Here's a paradox: The bond market has squeezed out only a 3 percent return so far this year, while U.S. stocks are up more than 13 percent. But in August, more than 90 percent of the $30 billion that flowed into all mutual funds and exchange-traded funds went into taxable-bond funds, according to research firm Morningstar.

One issue in play here: Many investors are rebalancing their portfolios after the recent runup in equities. U.S. stocks have more than tripled since the financial crisis. So an investor who had 60 percent in stocks and 40 percent in bonds then would have more than 75 percent in stocks now.

But this has been happening at a time when bonds have been seriously underperforming. Over the past 12 months, long-term Treasury bonds have lost more than 4 percent, and the overall bond market has delivered a gain of less than 1 percent, counting interest payments.

The High Costs of Flying

Have you flown lately? If you checked a bag, you may want to know that the airlines collected nearly $1.2 billion in baggage fees during the second quarter of 2017. That's a new record for a quarter and the fifth consecutive quarter that bag fees exceeded the billion-dollar threshold. Airlines collected another $737 million in reservation change and cancellation fees during the second quarter.

Airlines have collected more than $2.2 billion in bag fees and almost $1.5 billion in reservation change and cancellation fees through the first half of 2017. That's an average of more than $20 million per day in combined ancillary fees.

Airlines charged a record $4.2 billion in bag fees and $2.9 billion in ticket fees in 2016, a total of $7.1 billion. Since 2008, airlines have charged flyers almost $56 billion in bag and ticket change fees.

Who's Moving?

The share of Americans who moved to a different residence last year fell to its lowest point in the past decade, according to new estimates from the Census Bureau’s American Community Survey. But the degree of movement isn't the same for every generation.

This all-time low only holds when you include people under age 29, many of whom fall in the millennial generation. The number of people aged 20 to 24 who move has dropped by 6 percentage points in the last decade.

At the other end of the scale, older workers and those at or approaching retirement age are actually moving a bit more than they used to. U.S. residents ages 65 and over stopped moving as often in the wake of the recession, but in 2016 they actually moved at a faster rate than before the recession began.

The Wild World of Consumer Stocks

Retail-sector blowups have driven the correlation between stocks in the S&P 500′s consumer discretionary sector to their lowest levels in years. The rolling 65-day correlation for consumer discretionary stocks in the S&P 500 stocks is at 0.39, near the lowest in at least seven years, according to Chris Verrone and Todd Sohn at Strategas Research Partners. The average since the start of 2011 is 0.56.

The changing retail landscape has made for very different fortunes for different consumer companies. Some of the biggest movers this year:

• Wynn Resorts: up 66.58 percent
• Netflix: up 45.52 percent
• Mattel: down 47.30 percent
• Foot Locker: down 51.81 percent

A World of Contrasts

A lot of stocks listed in emerging economies are are having banner years. The  MSCI Emerging Market Index has climbed 28 percent in dollar terms in 2017, far outpacing the 12 percent advance for S&P 500, according to Yardeni Research.

But not all of them are flourishing, and the range of individual country performances has been extreme. Yardeni says the correlation between individual emerging-market stock exchanges this year has plunged to 10-year lows.

For example, the MSCI India Index this year is up 23 percent in rupees while Brazil has climbed 24 percent in reals. Meanwhile, Russian stocks, as measured by the MSCI benchmark in rubles, have slumped 9.1 percent. Pakistan, which was upgraded from frontier market to emerging status just this year, is down 19 percent.

Where the Buybacks Here

Buybacks for companies in the S&P 500 index have been steadily dropping: They reached $120.1 billion in the second quarter, which is off 5.8 percent from the year-ago period, when companies repurchased $127.5 billion of their own stock. It's also down 9.8 percent from the first quarter of 2017.

One area where buybacks actually increased was the technology sector. Tech spent $27.6 billion on buybacks in the quarter, up 0.5 percent from the first quarter of 2017. Tech represents 23 percent of all buybacks, according to S&P.

On the other hand, there's Apple. The largest company in the economy by market capitalization, Apple spent "just" $7.1 billion on buybacks in the second quarter, down from $10.2 billion in the second quarter of 2016.

Another Year for Coming Out of the Market

Even with stocks in the midst of one of their best-ever runs, investors are on pace to pull more money out of U.S. stock funds than they put in for the third straight year and the eighth in the last 10 years. Through the first seven months of this year, investors pulled a net $8 billion out of U.S. stock funds.

In the years running up to the Great Recession, more money was going into the market than coming out. Now, the tide is in the opposite direction. Investors pulled an average of nearly $24 billion out of domestic stock funds annually from 2008 through 2016.

Instead of U.S. stocks, investors have been more interested in bonds. More than $235 billion went into bond funds through the first seven months of the year.

The Bulls Are Back

After tracking below historical levels for much of the year, bullish sentiment among investors jumped to its highest level since January for the week ended Wednesday. That's according to the American Association of Individual Investors’ latest sentiment survey.

Of those polled, 41 percent said they felt the stock market would rise over the next six months, up from 29 percent in the prior week. Meanwhile, 22 percent said they expected stocks to fall, down sharply from 36 percent.

But remember, the AAII results are often a contrarian indicator. That’s because some feel the stock market is most likely to crash when investors are piling in with little hesitation, as was the case around the time of the dot-com boom. On March 8, 2000, AAII said 58 percent of investors were bullish on the stock market - two days before the Nasdaq Composite finally reached its peak.

The High Cost of Sports

America’s sports-industrial complex took in more than $100 billion last year, according to a survey released this week by CreditCards.com. Fans’ spending included $55.9 billion for sporting events, $33.4 billion for athletic equipment, $19.2 billion for gym memberships, $8 billion for sports-themed games, $4.8 billion for race entry fees and $2.3 billion for fantasy sports leagues.

In addition, 43 percent of the 18-to-53 age cohort paid to attend a sporting event in the preceding 12 months. Among those 53 and older, only 21 percent attended a sporting event.

CreditCards.com noted that a family of four put out $503 in 2016 to attend an NFL game, up 232 percent from $151 in 1991 - covering two adult tickets, two children’s tickets, two small beers, four small soft drinks, four hot dogs, two programs, two adult-size ball caps and parking. The same family spent $339 in 2016 to attend an NBA game, and $219 to watch a Major League Baseball game.

America's Good News

America's middle class had its highest-earning year ever in 2016, the U.S. Census Bureau reported yesterday. Median household income in America was $59,039 last year. That surpassed the previous record of $58,655 set in 1999.

We're even doing a little better here in the Northeast: Median household incomes here are the highest in the nation, at $64,390. That's followed by the West ($64,275), the Midwest ($58,305) and the South ($53,861).

The Census Bureau also reported Tuesday that the poverty rate fell 12.7 percent in 2016 — meaning 2.5 million people escaped poverty. This is the first time since the recession that the poverty rate has returned to the basic 2007 level of 12.5 percent, a sign of how the U.S. economy has recovered from the Great Recession.

The Old Bull

With the S&P 500 closing at a new all-time high yesterday, it has now been 3,108 calendar days since the last 20 percent decline, the traditional marker for a bear market.The current bull is now the second longest in history, behind the 4,494 days that passed between December 1987 and March 2000.

Today’s close was also a big deal in terms of gains for the current bull market.  The S&P’s gain of 267.6 percent over the course of this bull makes this the second strongest bull market on record as well, after the 1987 to 2000 era.

We haven't had a 10 percent correction in more than 18 months, but we also haven’t even had a correction of 5 percent since last June. The 441-day streak without a 5 percent correction is the sixth longest on record for the S&P 500.

A Good Time for Active Management

The research is in, and everyone agrees: This is a great investing landscape for active management. Nearly half of all actively managed U.S. stock funds did better than a composite of index funds in the 12 months through June, according to Morningstar.

The reason? Stocks are moving less often in herds, a departure from the years following the Great Recession. A scattered performance gives stock-picking managers more opportunities to differentiate themselves from index funds.

The Standard & Poor’s 500 rose 15.5 percent in the year through June 30, but that masks some big differences in performance underneath. The best-performing sector of the 11 that make up the index, financials, jumped nearly 33 percent over that time. The worst, telecoms, lost nearly 16 percent. That gap of nearly 49 percentage points between the first- and last-place sectors compares with a gap of 28 percentage points at the end of last year.

What Makes Millennials Sick

Do your money troubles make you sick? Financial anxiety has made about a quarter of millennials feel physically ill, according to a new study by Northwestern Mutual. It's also made more than half feel depressed.

For many millennials, who came of age and entered the job market during the economic recession, the bad feelings are pervasive. Some 69 percent said they experienced anxiety because of their income, 67 percent said it was because of their level of savings, and 53 percent said it was because of worry about losing their job.

About a third of the millennials surveyed said they were prone to excessive or frivolous spending, more than the 26 percent of those in Generation X and 19 percent of baby boomers who said this. Millennials spent $233 a month on meals, compared with $182 in older generations, and $161 per month on cellphone charges, versus $135 for people in older generations.

Worries for the Car Business

In the periodic Beige Book of regional economic reports, the Fed said that the U.S. economy expanded at a modest to moderate pace in July through mid-August, but that signs of an acceleration in inflation remained slight. While consumer spending increased in most districts, there are also many signs of worry about a prolonged slowdown in the auto industry.

In Cleveland, year-to-date production at auto assembly plants declined more than 16 percent when compared with the same period a year ago, although much of decline was due to retooling. Slowing demand for autos has led some of the Fed's reporters to temper their outlook for the economy in coming months. In Chicago, one contact noticed auto suppliers no longer are searching for space to build new factories.

Vehicle sales in August slumped to the worst rate in more than three years. After a multiyear auto expansion, there are mounting signs that American car buyers are beginning to lose interest.

Manufacturing Shows Strong

U.S. factories expanded at a brisk pace in August, a likely sign of strength for the U.S. economy as new orders, production and employment all improved. The Institute for Supply Management said last week that its manufacturing index rose to 58.8 percent last month from 56.3 percent in July.

Anything above 50 signals that factory activity is increasing. The measure now stands at its highest level since April 2011, pointing to solid economic growth.

Of the 18 industries in the index, 15 showed expansion, while only apparel, primary metals and furniture contracted. On Friday, data from the Bureau of Labor Statistics showed that manufacturing was one of the leading sources of U.S. job growth in August, adding 36,000 new positions.

Hollywood's Bummer Summer

Did you have a good summer? It was probably better than the one Hollywood had. The 18-week summer movie season — the first weekend in May through Labor Day weekend — is down more than 14 percent compared with the last two years.

The final numbers aren't in, but this will all but certainly be the first time in a decade that the summer season didn’t break $4 billion at the box office. The month of August brought in $649.5 million, a nearly 35 percent decline compared with the $993.8 million the August box office brought in last year.

Adding insult to injury, the movie business is set to end the season with possibly the worst Labor Day weekend in 30 years. Over the holiday weekend, there wasn't a single major wide release opening in theaters for the first time since 1992.

Thoughts for Labor Day

"When you have a country that can boast that more than 95 percent of its eligible workforce is employed and pumping money back into economy, that's exceptionally good news, especially as we prepare to observe Labor Day." ~ J. D. Hayworth

"God sells us all things at the price of labor."  ~ Leonardo da Vinci

"A mind always employed is always happy.  This is the true secret, the grand recipe, for felicity."  ~ Thomas Jefferson

August's Jobs Report

The employment situation cooled off slightly in August, with the economy adding 156,000 jobs, according to figures out this morning. That's down a bit from the average gain of 185,000 over the past three months. The headline unemployment rate ticked up to 4.4 percent.

Overall, hiring this year has averaged 176,000 a month, roughly in line with 2016's average of 187,000. The leading source of job growth in August was manufacturing, which added 36,000 jobs. Another 28,000 jobs came from construction.

One mystery remains: Why, with the economy nearing full employment, wages aren't rising faster. Average hourly pay has risen just 2.5 percent over the 12 months ending in August. Pay raises typically average 3.5 percent to 4 percent when the unemployment rate is this low.

An Even Stronger Second Quarter

The U.S. economic rebound in the second quarter was stronger than initially reported, the Commerce Department said Wednesday. It now says that gross domestic product rose at 3 percent rate from April through June, up from an initial 2.6 percent reading.

Consumer spending was the main engine for the strength in the second quarter, rising a revised 3.3 percent, up from the government’s original estimate of a 1.9 percent gain. Outlays of business investment rose at a revised 0.6 percent in the second quarter, up from a prior 0.4 percent estimate.

The government also reported that corporate adjusted pretax profits were up 6.7 percent over the past year, That's despite falling by 0.5 percent from the first to the second quarter.

Confident About Jobs

Consumers confidence strengthened in August to its second highest level since late 2000, a survey from the Conference Board released yesterday shows. The "present conditions" measure increased to its highest reading since July 2001.

The biggest reason for the boom in confidence is jobs. The labor differential, measuring the share of those saying jobs are plentiful minus the share saying jobs are hard to get, widened to 18.1 points, the most that figure has been since July 2001.

Those stating jobs are “plentiful” rose to 35.4 percent from 33.2 in July. Those saying that jobs are hard to get dipped to 17.3 percent, the lowest that number has been since August 2001.

Funds on the Run

It's been a rough stretch for domestic equity funds. Mutual funds and exchange-traded funds that invest in U.S. equities marked their 10th consecutive week of net outflows during the seven days that ended last Wednesday, according to Bank of America Merrill Lynch data. That's the longest such streak in 13 years.

There was $2.6 billion pulled from U.S. equity funds in that stretch, the latest recorded week. That's pushed withdrawals to $30 billion since late June, per Bank of America.

At the same time, investors put $3.1 billion into Japanese equity funds, the biggest inflow in five months, according to Bank of America. European equity funds had six straight weeks of inflows through mid-August, though they experienced $200 million in outflows in the most recent week.

Harvey's Impact

Hurricane Harvey brought unimaginable devastation to Texas this weekend, and our best wishes go out to all those affected. The economic impact promises to be immense: According to one estimate, rebuilding homes in the Houston area could end up costing as much as $40 billion.

We'll likely feel the effect here as well, since roughly a third of the nation's oil refineries are in southeast Texas. Wholesale gasoline prices are already looking at a 10 cent-a-gallon rise because of Harvey. Gasoline prices are likely to start rising in the coming weeks, say energy industry experts.

Places like New Jersey are expected to feel the biggest impact. In the Mid-Atlantic states, the price of a gallon of gas could rise 10 cents to 20 cents over the next two weeks.

Mortgage Rates Dropping Again

In a landscape where interest rates remain low, some are even dropping again. According to mortgage buyer Freddie Mac, 30-year mortgage rates have dropped to a new low for the year, reaching their lowest point since last November.

Thirty-year, fixed-rate mortgages fell to 3.86 percent, down from 3.89 percent last week. It was the fourth straight weekly decline for the key rate, bringing it to its lowest level since November 10, 2016.

But mortgage rates were even lower for most of 2016. A year ago at this time, the rate stood at 3.43 percent; it averaged 3.65 percent for all of last year.

Banks Are Lending Longer

According to a new report from the FDIC, banks are loading up on a record amount of loans that carry low rates for long periods. The percentage of bank assets that won’t mature or change rates for more than five years reached a new high in the second quarter.

Across all banks, the percentage of total assets that are at a fixed rate for more than five years was 27.5 percent in the second quarter of 2017. That's the highest that figure has been since the FDIC started tracking it in 1984. The measure reached 33.7 percent in the second quarter at larger banks, those with $1 billion to $10 billion in assets.

That means banks are allowing more borrowers to lock in low rates for long periods. That's a potential risk to the banks should rates move sharply higher, so it seems to be signaling that they expect rates to stay low for quite some time.

The Hidden Reason for Slow Wage Growth

The July jobs report from the U.S. Bureau of Labor Statistics brought welcome news on wage growth: Median weekly earnings rose 4.2 percent on an annual basis, the fastest pace seen since 2007. But the underlying story may be different from what the headline number suggests, according to a new report from the San Francisco Fed.

Wage growth for continuously full-time employed workers has been rising and is currently in line with rates seen at the previous economic peak in 2007. But aggregate wage growth continues to be held down by the entry of new and returning workers to full-time employment, who generally earn less than workers who already have full-time employment. And the turnover is in large part due to retiring baby boomers.

Sluggish wage growth, then, is less a condition of the labor market than it is due to demographics. Low wage growth is due in part to the large-scale exit of higher-paid baby boomers from the labor force. With so many of this generation still approaching retirement, the so-called Silver Tsunami will continue to be a drag on wage growth for some time.

The Crisis in Student Loans

Could the student loan debt crisis be getting even worse? Total student debt crisis has ballooned to more than $1.4 trillion, according to a new report from the Consumer Finance Protection Bureau - but that's not the end of it.

More than 40 percent of borrowers now leave school owing $20,000 or more, double the percentage from 2002. The share of borrowers owing $50,000 or more has more than tripled over the same time period, from 5 percent to 16 percent.

In addition, they're starting their repayments later. Half of student loan borrowers are over 34 when they start to repay their loans, twice the percentage since 2003. The share of borrowers who have failed to reduce loan balances after five years in repayment has also doubled, from 16 percent in 2008 to 30 percent in 2016.

The Ever-Steady Stock Market

How sleepy has the stock market been this year? For 2017 so far, the average daily trading range has been a minuscule 0.55 percent. That's the lowest percentage ever.

Here's another way to look at it: The S&P 500 through the end of last week, has not had a 5 percent decline, from peak to trough, since June 28, 2016. That sell-off, 6.1 percent over several days, occurred after Britain’s surprise vote on June 23, 2016, to leave the European Union.

So it's been nearly 14 months and counting since we had a serious sell-off. Going all the way back to 1950, the current streak is the fourth longest period without at least a 5 percent decline in the S&P.

The Dow Finally Stumbles

The Dow Jones industrial average, at long last, had a serious drop yesterday. The index fell by 1.2 percent, ending a 63-day streak of sessions without moves of 1 percent or more in either direction. That stretch was the longest since a 69-day streak in 1995.

All 30 Dow stocks also ended the day in the red. The Dow, which had just finished gaining 180 points over a four-day winning streak, had previously closed higher in 14 of the past 18 trading days.

The S&P 500 and Nasdaq both also dropped by more than 1 percent; the last time all three major benchmarks had finished down 1 percent or more was May 17. The Dow is now 1.7 percent off its closing record, with the S&P 500 and Nasdaq off 2.1 percent and 3.1 percent their respective closing highs.

The Good News in Retail

Americans have been in a spending mood. The Commerce Department reported this week that retail sales rose 0.6 percent in July from June. June's sales also were revised higher.

In July, Americans increased their spending on most goods except for clothes and gasoline. Sales also rose 1.2 percent at auto dealers, 1.2 percent at home and garden centers and even 1 percent at department stores that have been losing ground to internet rivals.

But market share losses to Amazon and similar companies remain a big problem for those department stores. Sales at nonstore retailers—a category that includes many online retailers—rose 1.3 percent last month from June. They were up 11.5 percent from a year earlier.

In Fear of Inflation

Americans rank inflation as top economic worry today, according to a new study from Allianz Life Insurance. When asked about their main economic worries today, the majority of respondents put inflation at the top of their list, with 32 percent saying they were either “panicked” or “very worried” about it.

The study found that 64 percent of respondents do not have a financial plan that addresses the rising cost of living in retirement. Of those who do, 51 percent claimed their financial “plan” to address it was to “be more frugal with money” when they retire.

On the other hand, respondents overestimated how much the cost of living will rise during retirement by predicting an average increase of 4.4 percent per year. According to the study, 31 percent of respondents thought the cost of living would go up between 5 and 10 percent per year and nearly one in 10 reported costs would increase more than 10 percent each year. The average inflation rate in the United States for the last 20 years has been only 2.15 percent.

Someone Still Loves Buybacks

One consequence of higher share prices for U.S. stocks this earnings season is that companies have pulled back considerably from buying back their own shares. New stock buybacks are at their lowest levels in five years, according to TrimTabs Investment Research. An average of just 2.8 S&P 500 companies have announced $1.4 billion in buybacks on a daily basis over the past five weeks of earnings season, the lowest such volume since May 2012.

But there's one area where there's still a lot of interest in buybacks: big banks. Bank of America, Citigroup, Goldman Sachs, J.P. Morgan Chase, Morgan Stanley, and Wells Fargo have accounted for a combined 20 percent of all stock buyback volume this year.

In addition to the 20 percent of buyback volume from banks, Apple alone accounted for 9 percent of buyback volume. Apple led buybacks with $7 billion in the second quarter, although that's off from the $10.2 billion it spent on buybacks in the second quarter of 2016.

The Dow's Losers

It's been a very strong year for the Dow Jones industrial average, which is up 14 percent so far in 2017. But not every Dow stock is a winner. Seven of the Dow's 30 stocks have lost ground on the year:

• Disney, down 3 percent
• Goldman Sachs, down 6 percent
• Chevron, down 6 percent
• Verizon, down 10 percent
• ExxonMobil, down 13 percent
• IBM, down 15 percent
• General Electric, down 20 percent

A Lost Decade for Retailers

Macy's and Kohl's both reported earnings yesterday, both disappointed, and both saw their stock drop like a rock. Macy's was off 8.8 percent on the day, while Kohl's was down 6.9 percent.

But it hasn't just been a bad quarter for retailers; it's been a bad decade. Pressed by the success of Amazon.com and lower-end retailers like Wal-Mart, many of the big retail chains have lost enormous amounts of their value in the past ten years. Some examples:

Nordstrom $12.4 billion market cap in 2006 to $8.3 billion in 2016: down 33 percent
Best Buy $28.4 billion to $13.2 billion: down 54 percent
Macy's $24.2 billion to $11.0 billion: down 55 percent
Kohl's $24.2 billion to $8.8 billion: down 64 percent
JCPenney $18.1 billion to $2.6 billion: down 86 percent
Sears $27.8 billion to $1.1 billion: down 96 percent

Gas Prices Hold Steady

Labor Day is now less than a month away and the summer driving season is starting to wind down.  According to AAA, the current national average price of a gallon of gas is $2.36 per gallon. While that is up considerably from this point last year, there have only been two years (one of them being last year) where gas prices were lower at this time of year than they are now. The only other year was 2005. 

Gasoline prices have shown a year-to-date increase of just 1.0 percent. There hasn’t been a single year since 2005 where prices saw a smaller year-to-date gain through August 8th.

Prices are typically up over 20 percent year-to-date by this point. The main reason for this year’s shortfall is that prices never saw the typical seasonal increase in the spring. We'll have to see if they also avoid the typical sharp price decline after Labor Day.

Record Job Openings

Employers across the U.S. had a record 6.2 million job openings posted at the end of June, a sign that employers are hungry for new workers, according to the Labor Department’s Job Openings and Labor Turnover Survey. After the recession, the number of job openings first set a new record in April 2015, and has continued to climb since then.

The number of job openings climbed by 417,000 in June for private employers. There were also an additional 44,000 government postings, which include state and local government.

On top of that, Americans are less likely to be laid off than at any point in at least 50 years. For every 10,000 people in the workforce, only 66 claimed new unemployment benefits in July, trending at the lowest point on record going back to 1967. The previous low point, 83 per 10,000, was touched in April 2000, at the height of the dot-com boom.

A Trillion Dollars in Debt

Americans now collectively have the most outstanding revolving debt — which is primarily credit card debt — in U.S. history. According to a report released by the Federal Reserve yesterday, Americans had $1.021 trillion in outstanding revolving credit in June 2017.

This beats the previous record set in April 2008, when consumers had a collective $1.02 trillion in outstanding credit revolving credit. Once the recession hit, banks wrote off more than $100 billion in credit-card loans over the next two years.

This year, total household debt — including housing, auto loans and student-loan debt — in the U.S. also surpassed the 2008 peak. Housing-related debt is down nearly $1 trillion since the 2008 peak, but auto loan balances are $367 billion higher, and student loans are a whopping $671 billion higher, according to the Federal Reserve.

The Dow's Slow and Steady Climb

Stocks have been rising most of the year, with the most recent visible success being the Dow Jones Industrial average climbing past 22,000 for the first time ever last week. But the market’s march higher has been slow. The Dow’s average daily move in either direction so far this year is 0.31 percent, the smallest since 1964, when it hit a record-low 0.30 percent, according to analysis by The Wall Street Journal’s Market Data Group.

The index hasn’t even had a move of more than 1 percent in either direction since mid-May. During the index’s move to 22,000 from its first close above 21,000 in March, the Dow had only four days where it moved by more than 1 percent.

And it’s not just the Dow. On Friday, the S&P 500 closed out its 12th consecutive session on Friday without a move of 0.3 percent or more in either direction. That's the longest such streak ever.

July's Jobs Report

July was another strong month for employment, with the economy adding another 209,000 jobs, according to figures released by the Labor Department this morning. The headline unemployment rate ticked down to 4.3 percent.

Employment growth has averaged 184,000 per month thus far this year, which is right in line with the average monthly gain for 2016, at 187,000. Over the past three months, job gains have averaged 195,000 per month.

The leading sector was food services and drinking places, where employment  rose by 53,000 in July. The industry has added 313,000 jobs over the course of the year. Professional and business services added 49,000 jobs in July, and health care employment increased by 39,000,

Why the Dow Is Soaring

The Dow Jones industrial average closed above 22,000 for the first time yesterday. That marks yet another record high in what has become one of its longest bull markets in history.

By far the biggest contributor to this surge has been Boeing, which has accounted for 45 percent of the Dow’s rise this year, far more than any of the other 29 companies in the index. Its shares have risen by more than 70 percent since last November.

Since the Dow hit 20,000 in January, investors have received a 57 percent return on investment from Boeing. They've also gotten a 37 percent return on Apple, and a 29 percent return on McDonald’s.

An Era of Personal Finance Pleasure

Americans are experiencing their highest levels of personal financial satisfaction in more than 10 years, according to the American Institute of CPAs. The AICPA's second quarter Personal Financial Satisfaction Index said stock market gains, more job openings and a decrease in inflation from the first quarter drove personal financial satisfaction to a high not seen since the fourth quarter of 2006.

The PFSi is calculated as the difference between the Personal Financial Pleasure Index minus the Personal Financial Pain Index. The pleasure part of the index set a record for the third consecutive quarter, clocking in at 66, up 1.4 points from the first quarter and 5.6 points from a year ago.

The pleasure index comprises four equally weighted factors that measure the growth of assets and opportunities. The Market Index has been the biggest contributor to the pleasure index for several years, setting a new record in the first quarter of this year.

Credit Card Losses on the Rise

In what could be a warning sign for markets and the broader economy, credit-card losses are mounting, a reversal of a six-year-long trend. The average net charge-off rate for large U.S. card issuers—the percentage of outstanding debt that issuers write off as a loss—increased to 3.29 percent in the second quarter, its highest level in four years, according to Fitch Ratings. The quarter was also the fifth consecutive period of year-over-year increases.

All eight large issuers, including J.P. Morgan Chase, Citigroup, Capital One and Discover Financial Services, had increases for the quarter. Card balances nationwide rose 6 percent over the last 12 months through May, a growth rate that is up from about 1 percent four years ago, according to the Federal Reserve.

While losses are rising, they remain low compared with historical levels. As the recession came to an end, the net charge-off rate reached 10 percent in early 2010.

Schwab Sees Confidence

A new report from Charles Schwab finds the firm’s retail clients more confident in decision making and better off financially in the first half of this year than they were in 2015 and 2016. Many think it’s a good time to invest. Twenty percent of Schwab clients said they expected to move money to individual stocks over the next three months, while 30 percent said they would hold steady.

The survey found that retail investors’ outlook for the U.S. stock market was up in the second quarter, with 42 percent feeling bullish, compared with 33 percent during the same period last year. Bearish sentiment declined from 39 percent in the 2016 second quarter to 35 percent a year later.

The average cash allocation among all Schwab clients in the first half fell to 19.8 percent from 21.1 percent at the end of 2016. Among investor types, millennials held more cash, 27 percent of their portfolios, than millionaires, with 16.6 percent, and active traders, with 18.2 percent.

Second Quarter GDP

U.S. economic growth picked up in the second quarter of the year, according to the report released by the Commerce Department this morning. Gross domestic product rose at a 2.6 percent annual rate in the April to June period. The second-quarter advance is a welcome rebound after a lackluster start to the year, when GDP grew at only 1.2 percent.

Consumer spending, the main engine of the economy, led the way with a 2.8 percent increase. Business investment in equipment rose 8.2 percent, while outlays on structures advanced 4.9 percent.

There were a couple of disappointing areas: The value of inventories fell slightly, to mark their second quarterly decline in a row. Investment in new housing also sank 6.8 percent. Exports rose 4.1 percent while imports edged up just 2.1 percent.

The State Rates

The new state-level employment reports are out from the Bureau of Labor Statistics, and New Jersey is ahead of the pack. Our state unemployment rate for June was 4.1 percent, just under the national rate of 4.4 percent. It's also down from 5.1 percent a year earlier.

Unemployment rates were at all-time lows in six states: Arkansas, California, Colorado, North Dakota, Tennessee and Washington. At 2.3 percent, Colorado has the lowest unemployment rate in the nation. Records for state unemployment rates go back to 1976.

At the other end of the scale, Alaska had the highest jobless rate, 6.8 percent, followed by New Mexico at 6.4 percent. But no state had a statistically significant increase in its unemployment rate over the past year.

Investing in a Weaker Dollar

The dollar’s unexpected drop in value this year is poised to boost the earnings of some of the biggest U.S. companies. The ICE Dollar index, which measures the currency against six peers, is down about 8 percent this year, nearing its lowest level in 13 months.

That’s good for companies that sell large amounts of their goods abroad. A weaker dollar often translates into increased demand for their products, which become cheaper to foreign buyers. S&P 500 companies obtained about 43 percent of their sales abroad at the end of 2016, according to S&P Dow Jones Indices, led by the energy sector, where 59 percent of revenue came from outside the U.S.

That means that if  the dollar's value ends 2017 where it is now, the 8 percent drop for the year would boost per-share earnings in the S&P 500 by 4 percent in 2018, according to Morgan Stanley. They estimate that profits increase 1 percent for every 2 percent fall in the dollar.

The Death of the 20 Percent Down Payment

It used to be axiomatic that first-time home buyers would need to come up with 20 percent of a house's purchase price for a down payment. But a new study shows that the 20 percent down payment is all but dead — and has been for quite some time, especially for first-time buyers.

More than 70 percent of noncash, first-time home buyers made down payments of less than 20 percent over at least the past five years, according to the National Association of Realtors. Just over half, or 54 percent, of all buyers put down less than 20 percent.

The typical down payment for 60 percent of first-time home buyers is 6 percent or less, according to NAR’s latest data. But NAR’s research finds few adults 34 and younger (just 13 percent) realize they can buy a house with a down payment of 5 percent or less.

Wall Street's Image Problem

Americans still don't like Wall Street. Despite efforts by Wall Street banks to regain trust since the 2008 financial crisis, fewer than a third of Americans view the industry positively -- no more than did in 2009, according to the latest Bloomberg National Poll.

Just 31 percent of Americans look favorably on corporate executives and Wall Street. The poll also shows that Americans are much more likely to distrust billionaires than admire them, 53 percent to 31 percent.

The Fed, meanwhile, improved its standing as the economy strengthened in recent years. Fifty-two percent of those surveyed view the central bank favorably, its highest score since the poll began tracking it in September 2009. Fed Chair Janet Yellen continues to toil in relative obscurity. More than half of respondents said they don’t know enough about her to form an opinion, while 28 percent view her favorably and 15 percent unfavorably.

Changes in the S&P

Next week, there will be five new entries on the S&P 500. MGM Resorts will replace Reynolds American, because British American Tobacco is acquiring Reynolds American in a deal expected to be completed next week.

The others are dropping off because their market caps have dropped them down to the S&P MidCap 400 The departing stocks:

• Mallinckrodt 
• Murphy Oil 
• Bed Bath & Beyond 
• Transocean 

Moving up from the S&P MidCap 400 to replace them:

• ResMed 
• Packaging Corporation of America
• A.O. Smith Corp. 
• Duke Realty Corp.

High Tech

Tech stocks broke a nearly two-decade-old record yesterday. The S&P 500’s information-technology sector ended the day at 992, closing above its previous all-time high of 988 set in March 2000 at the peak of the dot-com bubble. Tech stocks are by far the best-performing among the index’s 11 sectors this year, up 23 percent after posting their ninth consecutive day of gains on Wednesday.

Apple, the largest publicly traded company in the U.S., has posted its longest streak of consecutive gains since August 2014. Shares of other tech titans, such as Facebook and Microsoft, have also closed at all-time highs.

The tech-heavy Nasdaq Composite has been setting fresh highs all year, but the S&P tech sector has been slower to reclaim record levels than the Nasdaq, in part because it is missing some of the Nasdaq’s biggest gainers. Netflix and Amazon.com, though they are often associated with tech stocks and included in the Nasdaq, are classified by S&P as consumer-discretionary companies.