Vorisek Financial Weekly Market Update for April 10, 2019

Good morning!

While much has been written about the rally in the US stock market since late December, few market watchers saw that a powerful (and surprising) bond rally was also developing.  The gamechanger was the Federal Reserve, first raising rates 5 times over a 9-meeting stretch through mid-December 2018, then abruptly reversing course and all but promising no more rates hikes for the remainder of 2019.  Lower borrowing costs are always good for domestic stocks and for the American housing industry.  The S&P 500 index is up +16.0% YTD (total return).  The average interest rate on a 30-year fixed rate mortgage is 4.08% today, down 0.86 percentage points in just 5 months (source: BTN Research). 

As of the end of 2018, the US stock and bond market was worth a staggering $70 trillion, split between $27 trillion of stocks and $43 trillion of bonds.  The magnet for American equities has been the power of the products and the people that make up US businesses.  The magnet for the American bond market has historically been the integrity and liquidity of the deepest debt market worldwide.  More recently as the rest of the world’s central banks have dropped rates to stimulate their sagging economies, US interest rates stand out because they’re higher than found in most other industrialized countries (source: BTN Research).

Student loan debt nationwide, totaling $1.46 trillion as of 12/31/18, has been a drag on the US economy in multiple ways – reduced the number of first-time home buyers and delayed marriages within the Millennial generation, both of which have contributed in part to a 30-year low in the number of births in the USA (source: Census Bureau).                

Notable Numbers for the Week:

1.     REPURCHASE THE STOCK - Companies in the S&P 500 spent $806 billion on stock buybacks in 2018, breaking the old record for share buybacks of $589 billion set in 2007 (source: S&P).   

2.     HALF WORK, HALF DON’T – 156.7 million Americans have full-time jobs today, 48% of our 328.7 million citizens (source: Department of Labor).

3.     TRADE SCHOOL, NOT COLLEGE - There are 30 million full-time jobs in the United States today (19% of all jobs nationwide) that pay at least $55,000 per year and don’t require a bachelor’s degree from college (source: Georgetown University Center on Education and Workforce). 

4.     DO IT - 58% of Americans have not executed a will and other estate planning documents, e.g., a medical directive that specifies what actions should be taken to prolong an individual’s life (source: Caring.com). 

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Joshua DandurandComment