- YEAR-TO-DATE – The YTD total return of the S&P 500 is a loss of -0.38%, less than the index’s +3.8% average return for the first 4-months over the last 25 years (1993-2017). 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).
- MISSING THE BEST – The total return for the S&P 500 over the last 10 years (2008-2017) was a gain of +8.5% per year (total return). If you missed the 10 best percentage gain days over the 10 years (10 trading days in total, not 10 days per year), the +8.5% annual gain drops to an annual gain of +1.3% (source: BTN Research).
- AVOID THE WORST – The total return for the S&P 500 over the last 10 years (2008-2017) was a gain of +8.5% per year (total return). If you avoided the 10 worst percentage days over the 10 years (10 trading days in total, not 10 days per year), the +8.5% annual gain rises to an annual gain of +16.8% (source: BTN Research).
- ONE DAY – Of the top 50 “percentage gain days” for the S&P 500 over the last 10 years (2008-2017), only 1 has occurred in the last 6 years (2012-2017), i.e., a +3.9% gain (total return) on 8/26/15 (source: BTN Research).
- THREE PERCENT YIELD – On 7/08/16, the 1.625% coupon, 10-year Treasury note that matures on 5/15/2026 was priced at $102.36, resulting in a 1.36% yield, the lowest yield ever in history for the 10-year Treasury note. On 4/25/18 (last Wednesday), the 1.625% coupon, 10-year Treasury note that matures on 5/15/2026 was priced at $90.13, resulting in a 3.01% yield. Thus, the value of the 10- year note has dropped 12% over the 22 months since setting a record low yield (source: BTN Research).
- FROM A RECORD LOW YIELD – When the yield on the 10- year Treasury note bottomed on 7/08/16 at 1.36%, the average interest rate nationwide on a 30-year fixed rate mortgage was 3.41%. The average interest rate on a 30-year fixed rate mortgage is 4.58% today (source: Freddie Mac).
- NICE PLACE – In the years 2010-16 following the global real estate crisis, 46% of the new homes built in the United States had at least 4 bedrooms (source: Federal Reserve
Bank of St. Louis). - THEIR FAVORITE OPTION – 34% of 1,015 Americans surveyed in early April 2018 picked real estate as the best long-term investment today. 26% selected stocks as their top long-term choice (source: Gallup).
- GONE – The individual mandate penalty is eliminated on 1/01/19, i.e., Americans will no longer be penalized for failing to purchase acceptable health insurance coverage. The penalty in 2018 is the greater of a flat amount per uninsured family member ($695 per adult and $347.50 per child under the age of 18) or 2.5% of household income (up to the national average premium of a bronze level health plan) (source: Tax Cuts and Jobs Act).
- WORKER COST – The average employer in the private sector pays 44 cents in benefits (e.g., Social Security Medicare, unemployment insurance, workers’ compensation, life and health insurance, paid leave, retirement plans) for every $1 paid in salary (source: Department of Labor).
- AFTER TAX REFORM – Following the 10/22/86 signing of the “Tax Reform Act of 1986,” the US economy grew by an average of +3.8% per year for the subsequent 3-years, i.e., 1987-88-89. The last time that the US economy grew by at least +3.8% in a single year was in 2004 (source: Department of Commerce).
- ANOTHER BILL TO PAY – A 65-year old couple retiring in 2018 will need an estimated $280,000 (present value amount stated in 2018 dollars) to pay out-of-pocket health care costs during the couple’s retirement years. The $280,000 figure assumes the couple qualifies for Medicare but does not require nursing home care. This annual forecast has risen from $225,000 in 2008 (source: Fidelity).
- JUST IN CASE – The biggest banks in the United States, defined as those with at least $122.3 million of customer deposits, are required by the Federal Reserve to maintain a reserve balance of 10% of deposits. Smaller banks have smaller reserve requirements (source: Federal Reserve).
- NO INCREASE NEEDED – Purdue University announced on 4/12/18 that it will keep in-state tuition at $9,992 for the 2019-2020 school year, the 8th consecutive school year that Purdue has charged $9,992 for in-state tuition. The president of Purdue University is Mitch Daniels, former OMB director (source: Purdue University).
- BAMBINO – Los Angeles Angels baseball player Shohei Ohtani has won 2 games as a pitcher and has hit 3 home runs from the plate in games this season through 4/26/18. Babe Ruth is the last major leaguer to win 10 games as a pitcher and hit 10 home runs in a single season, a feat Ruth completed in 1918 (source: MLB).
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.
