Vorisek Financial | Weekly Market Update: January 16, 2019

Good morning!

President Donald Trump went directly to the American public in a national address last Tuesday (1/08/19) to pitch his concept of border security: $5.7 billion for a steel barrier and another $2.8 billion for immigration judges, border patrol agents and the technology to detect weapons and drugs at our border.  The total cost of President Trump’s border plan ($8.5 billion) is equal to what the US government will spend every 18 hours during fiscal year 2019.  But Washington lawmakers continued their political “game of chicken” throughout the weekend as the shutdown reaches day # 24 on Monday 1/14/19, the longest shutdown in US history (source: BTN Research).      

It didn’t solve the most difficult issues and it didn’t involve the key trade negotiators, but the US and China did move the ball down the field last week closer to a permanent tariff truce agreement.  The leverage that the US has identified is that China’s economy is slowing much quicker than had been expected.  Beijing is motivated to strike a deal to avoid any further US tariffs that are scheduled to come into play on 3/02/19.  America’s negotiators may not be satisfied until China reduces the subsidies that they currently provide its domestic companies, and also agrees to respect the copyrights that exist to protect the intellectual property of US multinational firms (source: BTN Research).              

Credit the recent Fed statement that suggests that there are no more rate hikes in the foreseeable future with providing the US stock market with the tailwind it had been missing.  Fed Chairman Jerome Powell’s admission that investors “should anticipate that we’re going to be patient” moved the S&P 500 upward last week as the index ended week # 2 of 2019 with a +3.6% YTD (total return) gain (source: BTN Research).               

Notable Numbers for the Week:

  1. MAJORITY OF THE TIME – Of the 10 bear markets for the S&P 500 index that have occurred since the end of WWII (i.e., declines of at least 20%), 7 took place concurrently with a recession (source: BTN Research).  

  2. GOING UP - Earnings per share of companies in the S&P 500 are projected to increase +8% in 2019.  Actual earnings per share increased +20.5% in 2018 (source: FactSet).  

  3. COMPLETE YOUR TAXES NOW - As a result of the December 2017 “Tax Cuts and Jobs Act,” 65% of US taxpayers will pay less in taxes for tax year 2018 than they did in tax year 2017, 6% will pay more and the remaining 29% will experience no material change up or down (source: Tax Policy Center).  

  4. BE PATIENT - Individuals who receive a referral from a general practitioner wait on average 5 months before receiving treatment from a specialist under Canada’s publicly funded health-care system (source: Fraser Institute).

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Joshua Dandurand