May 8, 2019

Good morning!

US employers added +263,000 jobs in April 2019, pushing the nation’s jobless rate to 3.6%, its lowest level since December 1969.  In fact, the government has reported an unemployment rate lower than 3.6% only 17 times since January 1954 (65 years ago), equal to just 2% of the preceding 783 months (source: Department of Labor). 

The US Federal Reserve has long maintained that +2% annual inflation is its target – somewhere between “too much inflation” (which can lead to an overheated economy that may suffer from runaway inflation) and “too little inflation” (which can lead to a sluggish economy that may stumble into a recession).  The message from Federal Reserve Chair Jerome Powell following last week’s meeting of the nation’s central bank: the Fed will do what it takes to get our “too little inflation” back on target, but for now, that commitment does not include an interest rate cut (source: Federal Reserve).     

Democratic leaders in the House and the Senate announced an “agreement in principle” with President Donald Trump last week on a $2 trillion infrastructure spending plan for the next decade.  The broad outline, roughly equivalent to $4 billion of spending per week for the next 10 years, would repair or replace our nation’s aging system of roads, airports, and power plants while bringing high-speed internet access to all sections of the country (source: White House).      

Notable Numbers for the Week:

1.     JUST FOURTEEN DAYS - The best 14 trading days for the S&P 500 over the last 10 years (2009-2018) gained +86.2% (total return), more than the +84.2% gained by the other 2,502 trading days in the decade (source: BTN Research). 

2.     ALL ARE TOO HIGH - On 12/17/18, 10 Wall Street strategists forecasted the yield of the 10-year Treasury note as of 12/31/19, i.e., a year into the future.  The 10 predictions ranged from a low of 2.75% to a high of 3.60%.  The yield on the 10-year Treasury note closed at 2.50% as of Tuesday 4/30/19 (source: Barron’s).   

3.     GOOD START - It was only the “advance” estimate on the growth of the US economy during the 1st quarter 2019, but the +3.2% increase (i.e., quarter-over-quarter change expressed as an annualized result) reported on 4/26/19 represents a rate that has not been bested during any calendar year since 2005 (source: Department of Labor). 

4.     DOLLARS IN, DOLLARS OUT - At the end of 2018, Medicare was covering 59.9 million Americans (18% of our population).  The program was cash positive in 2018, taking in $756 billion of income (including $10 billion of interest income) while paying out $741 billion in benefits (source: Medicare).   

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