June 12, 2019

Good morning!

The tariff dispute between the US and China is a clash between the world’s 2 largest economies.  The tariff dispute between the US and Mexico pits the world’s largest economy up against the globe’s 15th largest, coupled with an unequal relationship between the neighboring countries.  80% of Mexico’s exports are shipped to the United States, while just 16% of US exports are sold to Mexico.  President Trump’s greatest leverage was that an extended trade battle with the USA could tip Mexico’s economy into a recession, an outcome that Mexican President Lopez Obrador had to avoid.  Late last Friday night (6/07/19), the White House was satisfied with the progress made regarding border security and pulled the 5% Mexican tariffs off the table (source: BTN Research).    

Fed Chairman Jerome Powell may not have explicitly said a rate cut was going to occur in the near term, but that’s what the US stock market heard.  Powell’s commitment to “act as appropriate to sustain the (economic) expansion” increased the odds of a summer rate cut, three days before a sluggish jobs report from May 2019 showed only 75,000 new hires, well below the average 209,000 new jobs created each month over the last 5 years (source: Department of Labor).

A week ago (6/03/19), the S&P 500 was in the middle of a near 7% tumble driven by trade turf wars and a declining global growth outlook.  Before Chairman Powell came to the rescue, a market correction seemed more likely than a late week rally.  By Friday’s close however, the S&P 500 was back to a +15.7% YTD gain (source: BTN Research).              

Notable Numbers for the Week:

1.     SIX-TO-ONE RETURN - The average American worker who retires next year (in 2020) will have paid $36,000 in Medicare taxes during his/her working lifetime, far less than the $229,000 in Medicare benefits that he/she is projected to receive.  The projected lifetime benefit total is net of Medicare premiums paid by the retiree (source: Urban Institute). 

2.     MONEY - The top 10% of taxpayers received 47% of the $10.2 trillion of adjusted gross income (AGI) earned nationwide in tax year 2016.  The bottom 90% of taxpayers received the other 53% of AGI (source: Internal Revenue Service).  

3.     SUBJECT TO A TARIFF? - 35% of the auto parts used by domestic auto makers are manufactured outside the United States, then imported into America (source: Deutsche Bank). 

4.     SERVED OUR COUNTRY - The 18.2 million military veterans in the United States are split 91/9 between men and women (source: 2017 American Community Survey).  

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