- FIRST THREE MONTHS – The S&P 500 lost 0.8% (total return) in the 1st quarter 2018, breaking the index’s streak of 9 consecutive positive quarters. The loss was just its 2nd down quarter in the last 5 years. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).
- DOWN THEN UP – The last time that the S&P 500 was down on a total return basis for the 1st quarter yet finished up for the full calendar year was in 2009 when the index lost 11.0% during the first 3 months of the year but was up +26.5%for the entire year (source: BTN Research).
- HOT STOCK & COLD STOCK – The best performing individual stock in the S&P 500 during the first quarter 2018 gained +57.2%. The worst performing individual stock in the S&P 500 during the first quarter 2018 lost 38.5% (source: BTN Research).
- A GAIN THIS YEAR – 40% of the stocks in the S&P 500 were trading at a price as of the close of business on Thursday 3/29/18 that was higher than where the stocks ended 2017 (source: BTN Research).
- TENFOLD– The US bond market (including treasury, municipal, corporate, mortgage and asset-backed debt) was worth $40.8 trillion as of 12/31/17. The US bond market was worth $4.1 trillion as of 12/31/85 (source: Securities Industry and Financial Markets Association).
- WHAT ARE BOND BUYERS TELLING US? – The yield spread is the difference between the yields on the 10-year Treasury note and the 2-year Treasury note. That spread fell to just 0.47 percentage points last Thursday 3/29/18, i.e., 2.74% less 2.27%. The yield spread hasn’t been that low since 10/15/07 (source: BTN Research).
- MORE WITH LESS – After adjusting for inflation, manufacturing output in the United States is up +62% over the last 30 years, i.e., 12/31/87 to 12/31/17. However, the number of manufacturing jobs in the United States have declined 29% over the same 30 years, falling from 17.8 million to 12.6 million (source: Department of Labor).
- WRONG TREND – Net interest costs of the federal government made up 6.6% of total federal outlays in fiscal year 2017. But the expectation of higher interest rates in the future and rising federal debt levels are projected to push net interest costs to 12.0% of total federal outlays by fiscal year 2023 (source: CBO).
- TWICE AS MUCH – Student loan debt, equal to $1.38 trillion as of 12/31/17, has doubled in just over 8 years. Student loan debt was $690 billion as of 9/30/09 (source: Federal Reserve Bank of New York).
- LEVEL PLAYING FIELD – Insider trading is the buying or selling of a publicly traded security with the benefit of material, nonpublic information. Persons convicted of insider trading may be forced to repay any profits gained or losses avoided, along with being subject to civil penalties that can be up to 3 times the amount of the profits gained or losses avoided because of the insider trades. Violators are also subject to a maximum prison term of 20 years (source: SEC).
- THE ART OF THE DEAL – 6 days after President Trump announced steel and aluminum tariffs on 3/01/18, the White House released plans to exempt Mexico and Canada from those tariffs. By the time the tariffs became effective on Friday 3/23/18, 32 additional countries had been added to the growing exception list, including all 28 European Union (EU) countries plus Argentina, Australia, Brazil and South Korea. Further exemptions are expected over the next month (source: White House).
- UP LAST YEAR – The US homeownership percentage (i.e., “owner” households as a percentage of total households) was 63.4% in 2016, the lowest percentage nationwide since 1965 or 51 years earlier when the rate was just 63.0%. The homeownership percentage rose to 63.9% in 2017 (source: Census Bureau).
- EXPENSIVE – Healthcare spending makes up 18% of the $20 trillion US economy, equal to $11,000 per year for each of our nation’s 327 million citizens (source: Centers for Medicare & Medicaid Services).
- NEW HOMES – The average profit earned by builders of new single-family homes constructed in the USA in 2017 was 10.7% of the home’s total sales price. The average single-family home built last year had a total cost of $428,000, resulting in an average profit of $46,000 (source: National Association of Home Builders).
- WHEN IT REALLY MATTERS – The 2008 Detroit Lions NFL football team went 4-0 in the preseason, and then lost every game in a 0-16 regular season. The 2017 Cleveland Browns NFL football team went 4-0 in the preseason, and then lost every game in a 0-16 regular season (source: NFL)
IMPORTANT DISCLOSURE: The information contained in this material has been prepared for informational purposes only and does not constitute investment advice. Any mention of particular stocks or companies does not constitute and should not be considered an investment recommendation. Past performance is not a guarantee of future results. Any forward-looking statements presented in this material are inherently uncertain and cannot be relied upon as statements of actual performance.
Reproduction Prohibited without Express Permission – Copyright © 2018 Michael A. Higley. All rights reserved.
