Ten years after the financial crisis began in 2007, almost two-thirds of middle income baby boomers feel they have not benefited from the economic recovery. Half of those boomers report having less savings now than before the crisis.
That's according to the new Bankers Life’s Center for a Secure Retirement report, which surveyed 1,000 baby boomers, aged 52 to 70, with annual incomes between $30,000 and $100,000 and less than $1 million in investable assets. Only 31 percent of the respondents feel well prepared for retirement, down from 41 percent before the financial crisis. Just over one-third expect a personally satisfying retirement, down from 44 percent.
Close to half expect to keep working in retirement, full time or part time, compared to 35 percent before the financial crisis. More than two-thirds, or 68 percent, of middle-income boomers are worried about another financial crisis occurring in their lifetime.
Tuesday, February 28, 2017
Monday, February 27, 2017
The Effects of Missing Tax Refunds
Tax refunds may be a little slow in coming this year. Legislation passed in 2015 was aimed at preventing tax fraud - but it may also postpone funds being sent by the IRS to 25 million to 30 million U.S. households this year.
All told, the income tax delay may crimp consumer spending by as much as $21 billion in February, Goldman Sachs estimated earlier this month. One corner of the economy that is especially susceptible: restaurants.
At Jack in the Box, same-store sales may fall as much as 2 percent in the current quarter, while sales at its Qdoba chain may drop as much as 3 percent. Meanwhile, same-stores sales at Red Robin have fallen by 4.3 percent in the most recent quarter. All those dining companies are blaming the slow refunds for the slowdown.
All told, the income tax delay may crimp consumer spending by as much as $21 billion in February, Goldman Sachs estimated earlier this month. One corner of the economy that is especially susceptible: restaurants.
At Jack in the Box, same-store sales may fall as much as 2 percent in the current quarter, while sales at its Qdoba chain may drop as much as 3 percent. Meanwhile, same-stores sales at Red Robin have fallen by 4.3 percent in the most recent quarter. All those dining companies are blaming the slow refunds for the slowdown.
Friday, February 24, 2017
World Stocks Are Hot, Too
The rally in U.S. stocks now has spilled into the global markets. The MSCI ACWI Index, which serves as a proxy for the entire global equity market, set a new record yesterday, closing at the highest level in its 23-year history.
The MSCI index, which covers approximately 85 percent of the investable equity market worldwide, has risen 5.7 percent since the beginning of this year. The ACWI — which stands for All Country World Index — comprises 2,484 large and mid-cap stocks across both developed and emerging markets.
It's those emerging markets have led the way this year. Year to date, the MSCI Emerging Markets index has risen 10.3 percent, while MSCI World index, which captures stocks in developed countries, has gone up 5.2 percent.
The MSCI index, which covers approximately 85 percent of the investable equity market worldwide, has risen 5.7 percent since the beginning of this year. The ACWI — which stands for All Country World Index — comprises 2,484 large and mid-cap stocks across both developed and emerging markets.
It's those emerging markets have led the way this year. Year to date, the MSCI Emerging Markets index has risen 10.3 percent, while MSCI World index, which captures stocks in developed countries, has gone up 5.2 percent.
Thursday, February 23, 2017
The Fed's Next Move
After its January meeting, the Federal Reserve said it may raise interest rates again "fairly soon" if jobs and inflation data come in line with expectations, according to the minutes released yesterday. While the Fed chose to leave its interest rates unchanged at the meeting three weeks ago, investors widely expect two to three more rate hikes this year, perhaps as early as March.
The documents also showed that the Fed has begun discussing when to start unwinding its $4.5 trillion balance sheet of mortgage-backed and Treasury securities. Those remain on its books after the quantitative easing program, which was an effort to ease lending and stimulate the economy after the financial crisis.
Fed officials agreed they would start discussing what kind of economic conditions could lead to unloading those securities. Those changes are also expected to boost long-term interest rates.
The documents also showed that the Fed has begun discussing when to start unwinding its $4.5 trillion balance sheet of mortgage-backed and Treasury securities. Those remain on its books after the quantitative easing program, which was an effort to ease lending and stimulate the economy after the financial crisis.
Fed officials agreed they would start discussing what kind of economic conditions could lead to unloading those securities. Those changes are also expected to boost long-term interest rates.
Wednesday, February 22, 2017
The Quiet Price of Oil
Much has been said about the drop in volatility that we’ve seen in the stock market lately, but we’ve also seen a big drop in volatility for oil prices. Over the last 50 trading days, oil has averaged an absolute daily change of pus or minus 1.2 percent.
That’s significantly lower than where things stood last year at this time. During oil’s big price collapse from late 2014 through early 2016, volatility spiked significantly. In early 2016 when prices were about to bottom, oil had averaged a daily move of nearly plus or minus 4 percent over the prior couple of months.
While the current reading is down sharply compared to a year ago, it’s still not close to the lows seen just prior to the peak for oil prices in late 2014. Back then oil was seeing daily moves of just over half a percent.
That’s significantly lower than where things stood last year at this time. During oil’s big price collapse from late 2014 through early 2016, volatility spiked significantly. In early 2016 when prices were about to bottom, oil had averaged a daily move of nearly plus or minus 4 percent over the prior couple of months.
While the current reading is down sharply compared to a year ago, it’s still not close to the lows seen just prior to the peak for oil prices in late 2014. Back then oil was seeing daily moves of just over half a percent.
Tuesday, February 21, 2017
The High Cost of Traffic
Cheap gas and a surging economy are taxing the nation’s roads and contributing to congestion that cost U.S. motorists almost $300 billion last year in wasted time and fuel, according to a new report out this week. It's not surprising that New York City is among the worst - motorists spent 89 hours on average in traffic during peak periods last year.
Getting stalled on New York’s crowded streets cost drivers $2,533 each last year, according to the transportation analytics firm INRIX. Traffic problems cost the city as a whole nearly $17 billion.
But New York is far from the worst. Los Angeles had the worst traffic in the world among the 1,064 cities studied. The average driver in L.A. wasted 104 hours sitting in gridlock during the busiest commuting times last year, and lost $2,408 each in squandered fuel and productivity.
Getting stalled on New York’s crowded streets cost drivers $2,533 each last year, according to the transportation analytics firm INRIX. Traffic problems cost the city as a whole nearly $17 billion.
But New York is far from the worst. Los Angeles had the worst traffic in the world among the 1,064 cities studied. The average driver in L.A. wasted 104 hours sitting in gridlock during the busiest commuting times last year, and lost $2,408 each in squandered fuel and productivity.
Monday, February 20, 2017
A Too-Hot Market Sign
Is this market getting overheated? One of the most commonly used price-to-earnings ratios based on future earnings has reached its highest level since 2004, according to FactSet data.
The S&P 500 index's 12-month forward price-to-earnings ratio has climbed to 17.6, based on Friday’s closing price of 2,351 and a 2017 earnings-per-share estimate of $133.49. The current forward 12-month P/E ratio is now above the 20-year average of 17.2, according to FactSet.
The last time the forward P/E was this high was on June 23, 2004, when the S&P 500 closed at 1,144.06 and analysts expected $65.14 earnings per shares over the following 12 months. Forward P/Es peaked above 27 in 2000, just around the time the dot.com bubble burst.
The S&P 500 index's 12-month forward price-to-earnings ratio has climbed to 17.6, based on Friday’s closing price of 2,351 and a 2017 earnings-per-share estimate of $133.49. The current forward 12-month P/E ratio is now above the 20-year average of 17.2, according to FactSet.
The last time the forward P/E was this high was on June 23, 2004, when the S&P 500 closed at 1,144.06 and analysts expected $65.14 earnings per shares over the following 12 months. Forward P/Es peaked above 27 in 2000, just around the time the dot.com bubble burst.
Friday, February 17, 2017
The Rise in Debt
Total household debt climbed to $12.58 trillion at the end of 2016, an increase of $266 billion from the third quarter, according to a report from the Federal Reserve Bank of New York. For the year, household debt rose by $460 billion -- the largest increase in almost a decade. We're just short of the record high for total consumer debt of $12.68 trillion, set in 2008.
Some of this is good news. Mortgage originations increased to their highest level since the Great Recession. Mortgage balances, which make up the bulk of household debt, ended the year at $8.48 trillion.
Non-housing debt -- which includes credit card debt and student and auto loans -- grew strongly too. Student loan debt balances rose by $31 billion in the fourth quarter, to a total of $1.31 trillion. Auto loans jumped by $22 billion; new auto loan originations climbed to a record high in 2016.
Some of this is good news. Mortgage originations increased to their highest level since the Great Recession. Mortgage balances, which make up the bulk of household debt, ended the year at $8.48 trillion.
Non-housing debt -- which includes credit card debt and student and auto loans -- grew strongly too. Student loan debt balances rose by $31 billion in the fourth quarter, to a total of $1.31 trillion. Auto loans jumped by $22 billion; new auto loan originations climbed to a record high in 2016.
Thursday, February 16, 2017
Five Big Days
How's this for a winning streak: The Dow Jones industrial average, the S&P 500 index, and the Nasdaq all closed at record levels for a fifth session in a row yesterday. They hadn’t done that in more than a quarter of a century.
The last time all three benchmarks closed at records for five consecutive sessions was back on January 2, 1992. They went on to do it again for a sixth day in a row in a streak that ended on January 3, according to Dow Jones data.
There's a big difference, though. Back on January 3, 1992, the Dow industrials reached a then-record close of 3,201, the S&P 500 topped out at 419, and the Nasdaq reached 592. Yesterday, the Dow Jones Industrial Average finished at 20,611, the S&P 500 index finished at 2,349, and the Nasdaq closed at 5,819.
The last time all three benchmarks closed at records for five consecutive sessions was back on January 2, 1992. They went on to do it again for a sixth day in a row in a streak that ended on January 3, according to Dow Jones data.
There's a big difference, though. Back on January 3, 1992, the Dow industrials reached a then-record close of 3,201, the S&P 500 topped out at 419, and the Nasdaq reached 592. Yesterday, the Dow Jones Industrial Average finished at 20,611, the S&P 500 index finished at 2,349, and the Nasdaq closed at 5,819.
Wednesday, February 15, 2017
Small Business vs. the Markets
The National Federation of Independent Business said yesterday that its index of small business optimism reached its highest level in a dozen years last month, ticking up to 105.9. As recently as October, it was a below-average 94.9.
What's good news for small businesses may not be good news for the stock market, though. Figures from FactSet going back to the mid-1970s show that when the small business optimism index is 105 or higher, the S&P 500 has risen an average of just 4.7 percent over the following year.
The opposite is also true: When small businesses are feeling more pessimistic, the market does very well. When the NFIB small business index is at 85 or lower, the S&P 500 has gained 38 percent over the following 12 months.
What's good news for small businesses may not be good news for the stock market, though. Figures from FactSet going back to the mid-1970s show that when the small business optimism index is 105 or higher, the S&P 500 has risen an average of just 4.7 percent over the following year.
The opposite is also true: When small businesses are feeling more pessimistic, the market does very well. When the NFIB small business index is at 85 or lower, the S&P 500 has gained 38 percent over the following 12 months.
Tuesday, February 14, 2017
Inklings of Inflation
Is higher inflation on the horizon? A key measure of U.S. inflation expectations rose for a second straight month in January to its highest level since mid-2015, according to a Federal Reserve Bank of New York survey released yesterday.
The survey of consumer expectations, an increasingly influential gauge of prices for the U.S. central bank, found that year-ahead inflation expectations had increased to 3.0 percent. The same figure was at 2.8 percent in December and 2.5 percent in November.
The inflation expectation for three years out was 2.9 percent, up from 2.8 percent the month before. Both measures were last this high in June of 2015. The survey, which started three and a half years ago, hit its lowest forecast levels last year.
The survey of consumer expectations, an increasingly influential gauge of prices for the U.S. central bank, found that year-ahead inflation expectations had increased to 3.0 percent. The same figure was at 2.8 percent in December and 2.5 percent in November.
The inflation expectation for three years out was 2.9 percent, up from 2.8 percent the month before. Both measures were last this high in June of 2015. The survey, which started three and a half years ago, hit its lowest forecast levels last year.
Monday, February 13, 2017
Fewer Homeowners Are Underwater
Some good news from the housing market: The number of seriously underwater properties dropped significantly last year, with 1 million fewer reported at the end of 2016 than 2015. This is the lowest point for seriously underwater properties since the beginning of 2012.
"Seriously underwater" means the combined loan amount on the property was at least 25 percent higher than the home’s market value. According to ATTOM Data Solutions, 5.4 million U.S. homes were deemed seriously underwater at the close of 2016, accounting for 9.6 percent of all mortgaged properties in the nation. Such homes were down from 10.8 percent at the end of the third quarter of 2016.
On the other end of the spectrum, properties that are equity-rich—meaning the loan amount was 50 percent or less than the home’s market value—have risen. At the end of 2016, there were 13.9 million equity-rich properties, accounting for 24.6 of all properties. This marks a jump from 22.5 percent in 2015.
"Seriously underwater" means the combined loan amount on the property was at least 25 percent higher than the home’s market value. According to ATTOM Data Solutions, 5.4 million U.S. homes were deemed seriously underwater at the close of 2016, accounting for 9.6 percent of all mortgaged properties in the nation. Such homes were down from 10.8 percent at the end of the third quarter of 2016.
On the other end of the spectrum, properties that are equity-rich—meaning the loan amount was 50 percent or less than the home’s market value—have risen. At the end of 2016, there were 13.9 million equity-rich properties, accounting for 24.6 of all properties. This marks a jump from 22.5 percent in 2015.
Friday, February 10, 2017
A Poor State of Retirement
WalletHub has just released its annual list of the worst states to retire in, and New Jersey is, unfortunately, ranked sixth from the bottom, at No. 46 out of 50 states and the District of Columbia. On the bright side, that puts us one slot ahead of Hawaii.
What's wrong with retiring in the Garden State? The biggest problem is that it's too expensive: The survey put New Jersey 41st in affordability. It also ranked just 35th in quality of health care, although the overall quality of life rank was in the middle of the pack.
The absolute worst state to retire in? Rhode Island, which also finished dead last in affordability. In terms of quality of life, Washington, D.C., brings up the rear.
What's wrong with retiring in the Garden State? The biggest problem is that it's too expensive: The survey put New Jersey 41st in affordability. It also ranked just 35th in quality of health care, although the overall quality of life rank was in the middle of the pack.
The absolute worst state to retire in? Rhode Island, which also finished dead last in affordability. In terms of quality of life, Washington, D.C., brings up the rear.
Thursday, February 9, 2017
The Mystery of Lower Gas Prices
Summer driving season is still a long ways off, but there are already some interesting trends unfolding in the world of gasoline prices this year. According to AAA, the national average price of a gallon of gas currently stands at $2.27, which is down about 3 percent from where prices were at the end of 2016.
That's an unusual trend. Going back to 2005, on average, gas prices have risen by 1.3 percent by this point in the year. Since 2005, there have only been two other years (2007 and 2016) where the national average price saw a larger year-to-date decline by the first week of February.
In general, once February begins, we see a steady move higher until the start of the summer driving season around Memorial Day, when the price of gas typically reaches its peak for the year. If history is any guide, gas prices may well rebound in the weeks and months ahead.
That's an unusual trend. Going back to 2005, on average, gas prices have risen by 1.3 percent by this point in the year. Since 2005, there have only been two other years (2007 and 2016) where the national average price saw a larger year-to-date decline by the first week of February.
In general, once February begins, we see a steady move higher until the start of the summer driving season around Memorial Day, when the price of gas typically reaches its peak for the year. If history is any guide, gas prices may well rebound in the weeks and months ahead.
Wednesday, February 8, 2017
The Widening Trade Deficit
According to figures out this week, the U.S. trade deficit rose slightly in 2016 to $502.3 billion, reaching its highest level in four years. The trade gap widened last year because exports fell faster than imports, the result of a weak global economy and a stronger dollar that made American products more expensive to foreign buyers.
The gap with China is by far the largest among the major U.S. trading partners. Although the deficit dropped by 5.5 percent in 2016, it still totaled $347 billion. That’s more than 60 percent of the overall U.S. trade deficit.
Meanwhile, closer to home, the trade deficit with Mexico rose 4.2 percent, reaching $63.2 billion, in 2016. That marks a five-year high for that figure as well.
The gap with China is by far the largest among the major U.S. trading partners. Although the deficit dropped by 5.5 percent in 2016, it still totaled $347 billion. That’s more than 60 percent of the overall U.S. trade deficit.
Meanwhile, closer to home, the trade deficit with Mexico rose 4.2 percent, reaching $63.2 billion, in 2016. That marks a five-year high for that figure as well.
Tuesday, February 7, 2017
Slow and Steady
So far this year, the stock market has been going nowhere fast. The S&P 500 hasn’t experienced a daily trading range of 1 percent or greater for 34 consecutive trading sessions. That's the longest such streak since 1995, according to the Wall Street Journal’s Market Data Group.
The average daily range between a session’s intraday high and low over that stretch, dating back to December 14, is just 0.54 percent, according to FactSet. By comparison, the S&P 500′s average daily trading range in 2016 was 0.96 percent.
Still, all those little moves can add up, as long as there are many more up days than down days in there. On the year, the S&P has risen by a very solid 2.4 percent.
The average daily range between a session’s intraday high and low over that stretch, dating back to December 14, is just 0.54 percent, according to FactSet. By comparison, the S&P 500′s average daily trading range in 2016 was 0.96 percent.
Still, all those little moves can add up, as long as there are many more up days than down days in there. On the year, the S&P has risen by a very solid 2.4 percent.
Monday, February 6, 2017
A Quiet January
With the first month of the year now in the books for the stock market, this past January was among the most stable Januarys we have seen in quite some time. The largest decline that the S&P 500 saw from a closing high during the month was just 0.85 percent, which is the smallest since last July.
The S&P 500’s average daily percent change in January was just plus or minus 0.33 percent. In the 1,069 months since 1928, January of 2017 ranks as the 66th smallest average daily move for a given month in the S&P 500’s history.
For the month of January specifically, there have only been five other Januarys where the S&P 500 saw an average daily percentage move that was smaller than this January. Looking ahead to this month, quiet Januarys haven’t had any notable impact on market returns in February: The S&P 500 has been up following three of those five Januarys, with a median gain of 0.99 percent.
The S&P 500’s average daily percent change in January was just plus or minus 0.33 percent. In the 1,069 months since 1928, January of 2017 ranks as the 66th smallest average daily move for a given month in the S&P 500’s history.
For the month of January specifically, there have only been five other Januarys where the S&P 500 saw an average daily percentage move that was smaller than this January. Looking ahead to this month, quiet Januarys haven’t had any notable impact on market returns in February: The S&P 500 has been up following three of those five Januarys, with a median gain of 0.99 percent.
Friday, February 3, 2017
January's Jobs Report
The American economy generated 227,000 new jobs in January, marking the biggest gain in four months. Because the workforce expanded as well, the unemployment rate rose a tick to 4.8 percent, the Bureau of Labor Statistics said this morning.
Retail trade added 46,000 jobs in January, the single-best gain for any sector, which seems a bit odd, given it happened in the post-holiday shopping season. Clothing and clothing accessories added 18,000, electronics and appliance stores added 8,000, and furniture and home-furnishings stores added 6,000.
One downside: The change in total nonfarm payroll employment for November was revised down from 204,000 jobs to 164,000. Over the past three months, job gains have averaged 183,000 per month.
Retail trade added 46,000 jobs in January, the single-best gain for any sector, which seems a bit odd, given it happened in the post-holiday shopping season. Clothing and clothing accessories added 18,000, electronics and appliance stores added 8,000, and furniture and home-furnishings stores added 6,000.
One downside: The change in total nonfarm payroll employment for November was revised down from 204,000 jobs to 164,000. Over the past three months, job gains have averaged 183,000 per month.
Thursday, February 2, 2017
Reading the Fed Announcement
At its first meeting of 2017 yesterday, the Federal Reserve left its benchmark rate unchanged in a range of 0.50 percent to 0.75 percent, as expected. But it also gave no indication when the next rate hike might come, meaning we could have rates this low for a while yet.
The Fed noted the improvement in both business and consumer sentiment since its December meeting, when it did raise rates. But household spending growth has been moderate, and business fixed investment remains soft.
Last December's dot plot forecast suggested that the Fed was considering raising rates three times in 2017. It would have made sense for the Fed to hike in March if that was still the expectation, but yesterday's announcement makes that less likely to happen.
The Fed noted the improvement in both business and consumer sentiment since its December meeting, when it did raise rates. But household spending growth has been moderate, and business fixed investment remains soft.
Last December's dot plot forecast suggested that the Fed was considering raising rates three times in 2017. It would have made sense for the Fed to hike in March if that was still the expectation, but yesterday's announcement makes that less likely to happen.
Wednesday, February 1, 2017
Two Ways for Earnings
So far this earnings season, the average stock that has reported has gained 0.13 percent on its earnings reaction day, which is the first trading day following a stock’s earnings report. But the reading has been quite different depending on what sector the stock has been in.
Stocks in the energy and materials sectors that have reported earnings this season have been getting positive reactions. The average energy stock has gained 0.86 percent on its earnings reaction day, while the average materials stock has gained 0.81 percent.
Meanwhile, consumer staples and health care stocks have had dreadful reactions to their earnings this season. The average consumer staples stock that has reported has fallen 1.61 percent on its earnings reaction day, while the average health care stock has fallen 1.28 percent.
Stocks in the energy and materials sectors that have reported earnings this season have been getting positive reactions. The average energy stock has gained 0.86 percent on its earnings reaction day, while the average materials stock has gained 0.81 percent.
Meanwhile, consumer staples and health care stocks have had dreadful reactions to their earnings this season. The average consumer staples stock that has reported has fallen 1.61 percent on its earnings reaction day, while the average health care stock has fallen 1.28 percent.
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