By The Numbers August 2019
1. SINCE THEN – Today is the 8-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 fallen from 2.57% to 1.85% and the S&P 500 has gained +189% (total return), equal to +14.2% 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).
2. 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).
3. AND THE WORLD DIDN’T COLLAPSE – Today is the 2,000th trading day for the bond market since the USA was downgraded by S&P from a top credit rating on 8/05/11 (source: BTN Research).
4. NOT NOW – The last year when the highest close during the year for the S&P 500 occurred during August was in 1987. Since 1987, the high close for the index has occurred in December 17 times (source: BTN Research).
5. BACK-TO-BACK WINNER – The best performing stock within the S&P 500 YTD through 7/31/19 gained +84.3%. That same stock gained +49.4% in 2018, the 5th best S&P 500 stock performer (source: BTN Research).
6. THE ECONOMY AND THE WHITE HOUSE – There have been just 2 US presidents in the last 75 years who were elected to a first term in office who failed to win their re-election bid for a 2nd term – Jimmy Carter in November 1980 and George H.W. Bush in November 1992. Our nation’s GDP fell 0.3% in 1980 but grew +3.5% in 1992. Gross Domestic Product (GDP) is the annual market value of all goods and services produced domestically by the US (source: Commerce Department).
7. BONDS – The bond market is up +6.3% YTD (total return) through 7/31/19. The last time the bond market had a calendar year performance better than +6.3% was in 2011 or 8 years ago when bonds gained +7.8%. The Bloomberg Barclays Aggregate bond index, calculated using 6,000 publicly traded government and corporate bonds with an average maturity of 5 years, was used as the bond measurement (source: BTN Research).
8. GUARANTEED LOSS – There are $13 trillion of “negative-yielding” government bonds in the world today, i.e., a bond investor who holds the debt instrument to maturity will receive less money back over the bond’s lifetime, including annual interest, than what he/she paid for the bond up front. $6 trillion of the $13 trillion is Japanese sovereign debt. None of the $13 trillion is US government debt (source: Bloomberg).
9. JUST IGNORE IT – The “Bipartisan Budget Act of 2019” was signed into law by President Donald Trump on Friday 8/02/19. The bill increases our nation’s discretionary spending by $324 billion over the next 2 fiscal years (2020-2021) above the statutory caps agreed to by Congress in December 2011 (source: BBA 2019).
10. A LOT IN A FEW – Of the 532 bank failures that have occurred in the USA during the 15 years ending 7/31/19, 51% (270 failures) have taken place in just 4 states – Georgia, Florida, Illinois and California (source: FDIC).
11. DURING THE LAST RECESSION – The price of crude oil fell 77% over a 5 ½ month period during 2008, dropping from $145.29 on 7/03/08 to $33.87 on 12/19/08 (source: New York Mercantile Exchange).
12. WHAT THE FED USES – The government measures inflation in 8 major categories and then weights them to produce an overall CPI total. The largest weighting in the CPI market basket is “housing” (42%), while “medical care” makes up only 8% of the index. The Federal Reserve prefers to measure inflation using the PCE index, i.e., “personal consumption expenditures.” “Housing” is given a 24% weighting in the PCE index while “medical care” makes up 22% of the PCE index. The consumer price index (CPI) and the PCE index are measurements of inflation compiled by the US Bureau of Labor Studies (source: Department of Labor).
13. WHERE WE LIVE – 40% of American homeowners, i.e., 31.4 million out of 78.5 million, own their primary residence free and clear of any debt, i.e., no outstanding mortgage debt or home equity loan. The 31.4 million homeowners with zero housing debt represent 26% of the 122.4 million households in the United States today; the latter total including 43.9 million households who are renters and not owners (source: Census Bureau).
14. GROWING POPULATIONS – From 1970 to 2019, San Jose has gone from the # 31 largest US city to # 10, and Phoenix has gone from # 20 to # 5 (source: Census Bureau).
15. REALLY FAST OLD GUY – 70-year old Charles Allie of Pittsburgh ran the 400 meters in :57.26 seconds in September 2018, a world record time for runners at least age 70 (source: New York Times).