April turned out to be a fairly decent month for the S&P 500. The large-cap index rose by just 0.85 percent, which may not sound like a lot, but if we could keep up that pace every month, we'd be looking at a 10 percent annual growth rate.
But it was a bad month for small-cap stocks, as measured by the benchmark Russell 2000, which fell by 2.6 percent. This was the second consecutive miserable April for small caps; last year at this time, the Russell 2000 dropped by 3.9 percent.
Coincidence? Maybe, but there is a possible explanation. The first quarter of 2014, like this year's first quarter, was very disappointing from a GDP standpoint, and there's a theory that the strength of the economy has a disproportionate effect on smaller stocks.
Monday, May 11, 2015
Friday, May 8, 2015
April's Jobs Report
April's employment report was a big bounceback from the disappointing March numbers, with the economy adding 223,000 jobs last month. The rebound from the previous month was even bigger than expected, since the Bureau of Labor Statistics also revised the March number downward from 126,000 to just 85,000.
The headline unemployment rate dropped slightly to 5.4 percent. That number is now at its lowest point since May 2008. April marked the 55th straight month of employment gains in the U.S.
In retrospect, March was the worst month for jobs since June 2012. The strong numbers for April have given hope that the economy simply stumbled in the first quarter, when in addition to that drop in the jobs numbers, overall GDP rose by an anemic 0.2 percent.
The headline unemployment rate dropped slightly to 5.4 percent. That number is now at its lowest point since May 2008. April marked the 55th straight month of employment gains in the U.S.
In retrospect, March was the worst month for jobs since June 2012. The strong numbers for April have given hope that the economy simply stumbled in the first quarter, when in addition to that drop in the jobs numbers, overall GDP rose by an anemic 0.2 percent.
Thursday, May 7, 2015
The World of the Living Inheritance
There's a definite new trend going on in the world of retirement savings: "living inheritance." This is when retirees are required to provide support to another person. A new report by HSBC says that 43 percent of all retirees said they were helping a family member or younger person out financially.
That's not much different from the percentages among pre-retirees. Among those who are still working, 62 percent said they provide regular support to another person.
But there are significant numbers of people who don't mind this. Almost a quarter of workers said they would rather spend or give away all their assets while they’re still alive rather than pass it on as part of an inheritance. Another quarter said they worry about not being able to support their loved ones financially.
That's not much different from the percentages among pre-retirees. Among those who are still working, 62 percent said they provide regular support to another person.
But there are significant numbers of people who don't mind this. Almost a quarter of workers said they would rather spend or give away all their assets while they’re still alive rather than pass it on as part of an inheritance. Another quarter said they worry about not being able to support their loved ones financially.
Wednesday, May 6, 2015
A Nation of Renters
We are becoming a nation of renters: According to RealtyTrac's latest Cash, Investor & Distressed Sales Report, owner-occupant buyers accounted for just 63.2 percent of all residential single family home and condo sales in the first quarter of 2015. That's down from 65.8 percent in the fourth quarter of 2014, and 68.6 percent a year ago.
Meanwhile non-owner-occupant buyers - cleverly defined as a buyer who purchased a property but has their property tax bill mailed somewhere else - reached a new high of 36.8 percent in the first quarter of 2015, the highest level for that figure since the first quarter of 2011. Some 44.7 percent of all non-owner-occupied purchases went to all-cash buyers, down from 61.0 percent a year ago.
The U.S. Census is also reporting that the homeownership rate in the first quarter of 2015 fell to 63.7 percent, the lowest since 1990. Whether it's fallout from the recession and the housing crisis, or simply Americans not wanting to put down roots, it's clear that buying a house to live in is in a downward trend.
Meanwhile non-owner-occupant buyers - cleverly defined as a buyer who purchased a property but has their property tax bill mailed somewhere else - reached a new high of 36.8 percent in the first quarter of 2015, the highest level for that figure since the first quarter of 2011. Some 44.7 percent of all non-owner-occupied purchases went to all-cash buyers, down from 61.0 percent a year ago.
The U.S. Census is also reporting that the homeownership rate in the first quarter of 2015 fell to 63.7 percent, the lowest since 1990. Whether it's fallout from the recession and the housing crisis, or simply Americans not wanting to put down roots, it's clear that buying a house to live in is in a downward trend.
Tuesday, May 5, 2015
Sell in May? Don't Bother
The old adage "sell in May and go away" has just come into effect - signifying that the worst months historically for the stock market have been May through October. But like most old adages, this one is a little overblown. The summer months are the worst months for stocks, but they won't kill your portfolio.
The advantage is real: From 1929 through the end of 2014, the S&P 500 index returned an average of 7.1 percent from November through April but just 3.9 percent from May through October, according to Morningstar. It's even more pronounced for small caps, which have returned 10.5 percent in the winter months since 2002, but just 2.0 percent in the summer.
But it's hardly worth dealing with. According to MarketWatch, if you had simply employed a buy-and-hold strategy on the broad-based Wilshire 5000 index since June 2002, you would have earned an average annual return of 7.7 percent. If you had sold all your holdings each May, bought T-bills, then bought back the stocks at the end of October, you would have bumped that return all the way up to 7.9 percent.
The advantage is real: From 1929 through the end of 2014, the S&P 500 index returned an average of 7.1 percent from November through April but just 3.9 percent from May through October, according to Morningstar. It's even more pronounced for small caps, which have returned 10.5 percent in the winter months since 2002, but just 2.0 percent in the summer.
But it's hardly worth dealing with. According to MarketWatch, if you had simply employed a buy-and-hold strategy on the broad-based Wilshire 5000 index since June 2002, you would have earned an average annual return of 7.7 percent. If you had sold all your holdings each May, bought T-bills, then bought back the stocks at the end of October, you would have bumped that return all the way up to 7.9 percent.
Monday, May 4, 2015
Truckin'
Here's another little piece of fallout from the drop in gas prices: General Motors said the average price paid for one of its vehicles in April reached $34,750, up $880 from the year earlier. GM’s upscale GMC Denali truck and SUV lineup represented nearly a quarter of the brand’s sales in April, a record high. Pickups and SUVs are generally far more profitable for the industry than passenger cars.
Gas prices are still down by more than a dollar a gallon from a year ago, making it easier to fill up the tank on one of those bigger vehicles. That class of vehicle notched 54 percent of April U.S. sales, three percentage points higher than a year ago.
On top of that, the automakers have been focusing on giving them better fuel economy. Light trucks are now averaging 21.7 miles per gallon, a 13 percent improvement over 2010, according to researcher WardsAuto.com. The most-efficient version of Ford’s Explorer SUV now gets 28 mpg on the highway, compared with the 21 mpg for the Explorer of 2005.
Gas prices are still down by more than a dollar a gallon from a year ago, making it easier to fill up the tank on one of those bigger vehicles. That class of vehicle notched 54 percent of April U.S. sales, three percentage points higher than a year ago.
On top of that, the automakers have been focusing on giving them better fuel economy. Light trucks are now averaging 21.7 miles per gallon, a 13 percent improvement over 2010, according to researcher WardsAuto.com. The most-efficient version of Ford’s Explorer SUV now gets 28 mpg on the highway, compared with the 21 mpg for the Explorer of 2005.
Friday, May 1, 2015
Inflation Keeps Puttering Along
Inflation continues to be running at barely noticeable levels. The personal consumption expenditures price index, the Fed’s preferred inflation gauge, rose just 0.3 percent in March from a year earlier, the Commerce Department said yesterday. That's the same rate of increase that we saw in February as well.
Other measures looked a bit higher, but not extraordinarily so. Excluding the volatile food and energy categories, prices climbed 1.3 percent in March from a year earlier, the fourth consecutive month at that rate.
This has been going on for a really long time now. March was the 35th consecutive month that inflation has undershot the Fed’s stated inflation goal of 2 percent. We haven't had a month with the personal consumption expenditures index above 2 percent since May 2012.
Other measures looked a bit higher, but not extraordinarily so. Excluding the volatile food and energy categories, prices climbed 1.3 percent in March from a year earlier, the fourth consecutive month at that rate.
This has been going on for a really long time now. March was the 35th consecutive month that inflation has undershot the Fed’s stated inflation goal of 2 percent. We haven't had a month with the personal consumption expenditures index above 2 percent since May 2012.
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