- CREDIT DOWNGRADE – Sunday (8/05/18) is the 7-year anniversary since the USA was downgraded on 8/05/11 by S&P from a top credit rating. Since 8/05/11, the yield on the US 10-year Treasury note has risen from 2.57% to 2.96% and the S&P 500 has gained +172% (total return), equal to +15.5% per year. 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).
- INITIAL SHOCK – The S&P 500 stock index fell 6.6% (total return) during the first trading day following the Friday 8/05/11 credit downgrade of the United States by the S&P rating agency (source: BTN Research).
- TIME IN THE STOCK MARKET – If you selected any single month at random to invest in the S&P 500 (at the close of the prior month) during the 25-years ending 6/30/18, you achieved a positive total return 66% of the time. If you extend your investment time horizon to just 1 year, you achieved a positive total return 81% of the time. If your time horizon was 2 years, you achieved a positive total return 80% of the time (source: BTN Research).
- A WILD NINE MONTHS – The 10 best trading days for the S&P 500 in the last 10 years (i.e., 7/01/08 to 6/30/18) all occurred between 7/01/08 and 3/31/09, i.e., the first 9 months of the last 10 years. The 9 months correspond to the 8 months before and the 1 month after a “bear” market that ended on 3/09/09 (source: BTN Research).
- SIX MONTHS – The S&P 500 closed at an all-time high of 2873 on 1/26/18. 6 months later (Thursday 7/26/18), the index closed at 2837. The index’s total return over the 6 months was a loss of 0.3% (source: BTN Research).
- FEW STOCKS, LARGE IMPACT – The 10 largest stocks in the S&P 500 made up 21% of the total stock market capitalization of the index as of 6/30/18. Thus, 2% of the stocks in the index (i.e., 10 stocks out of 500) represent 21% of the total value of the index. The S&P 500 is a market-cap weighted index (source: S&P).
- AGING POPULATION – There are 2.8 workers (paying payroll taxes) for every 1 Social Security beneficiary in 2018, i.e., there are 36 beneficiaries for every 100 covered workers today. The program is projecting that there will be 2.2 workers for every 1 Social Security beneficiary in the year 2035, i.e., there will be 46 beneficiaries for every 100 covered workers in 2035 (source: Social Security Trustees 2018 Report).
- ALREADY HAPPENING – Before the Trump White House began threatening to impose trade tariffs, the United States already was imposing a 2.5% tariff on imported foreign vehicles. American autos exported to the 28-nation European Union were already subject to a 10% tariff (source: BTN Research).
- IT’S A GLOBAL MARKETPLACE – The companies in the S&P 500 received 43% of their 2016 sales from foreign customers (source: S&P Global Inc.)
- WHAT THE WORLD BUYS FROM US – The top 3 American exports sold in 2017 to foreign buyers were aircrafts, gasoline (and other refined petroleum products), and motor vehicles (source: Commerce Department).
- BANK TAKEOVER – Lenders foreclosed on 133,290 homes in the first 6 months of 2018, down 21.2% from 169,124 foreclosures in the first half of 2017. The peak of bank repossessions in the last decade was in 2010 when more than 1 million homes (1,050,500) were taken back by lenders (source: Attom Data Solutions).
- REAL ESTATE SHIFT – Over the 10 years from 6/30/07 to 6/30/17, the number of “renter” households in the USA increased by 8.4 million to 43.4 million, while the number of “owner” households increased by just 0.9 million to 76.1 million. However, over the latest 12 months from 6/30/17 to 6/30/18, the number of “renter” households in the United States declined by 0.1 million to 43.3 million, while the number of “owner” households increased by 1.8 million to 77.9 million (source: Census Bureau).
- HOME PRICE – The median sales price of existing homes sold in the USA in June 2018 was $276,900, a record price. However, the median sales price of existing homes sold in July 2006 ($230,200) is equal to $285,051 in today’s dollars, the record high price on an inflation-adjusted basis (source: National Association of Realtors).
- THE PROPERTY WAS INSURED – Property and casualty insurers paid out a record $135 billion globally in 2017, the highest amount ever. Catastrophes included hurricanes, earthquakes, hail damage and wildfires (source: Munich Re).
- ALL WORTH BILLIONS – 4 of the 10 most valuable sports franchises in the world are NFL football teams – the Dallas Cowboys, the New England Patriots, the New York Giants, and the Washington Redskins. The Cowboys, worth an estimated $4.8 billion, are the globe’s most valuable sports franchise (source: Forbes).
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.
