July 31, 2019

Greetings!

In December 2011, Congress passed the “Budget Control Act of 2011” which set spending limits for our country’s discretionary spending (i.e., not Social Security, not Medicare, not Medicaid) for the 9 fiscal years of 2013-2021.  Last week the House voted to ignore those spending caps (the Senate will vote on the legislation this week) and increase our nation’s discretionary spending by $171 billion in FY 2020 and $153 billion in FY 2021, the 5th time Congress has taken such action since January 2013.  The bill “kicks the can” down the road that would force Congress to finally control its spending.  The White House and Congress are also expected this week to suspend our nation’s debt ceiling limit for 2 years from now until 7/31/21, i.e., there will be no statutory limit on borrowing by the United States government for the next 2 years (source: BTN Research).        

Just under a third of the companies in the S&P 500 reported 2nd quarter 2019 earnings last week.  Even some “less than stellar” numbers from a few high-profile corporations could not derail the bull market for US stocks.  The S&P 500 set 2 more all-time record closes last week, making it 13 this year, and finds itself up +22.1% YTD (total return) through the close of trading on Friday 7/26/19 (source: BTN Research).       

US trade officials are expected to meet in Beijing this week, restarting trade negotiations that broke down in May 2019.  American exports to China were $43 billion YTD through 5/31/19, down 19% from $53 billion a year earlier (source: Commerce Department).       

Notable Numbers for the Week: 

1.      VERY DIFFERENT PERIODS - In the last 25 years, i.e., 7/01/94 to 6/30/19, the USA suffered just 2 recessions.  In the 25 years before that, i.e., 7/01/69 to 6/30/94, the USA had suffered 5 recessions (source: National Bureau of Economic Research).

 2.      WHAT IF THEY GOT MAD AND LEFT? - The wealthiest 1% of Californians, i.e., taxpayers reporting adjusted gross income of at least $877,560, pay 48% of the total state income tax collected (source: Institute for Taxation and Economic Policy).    

 3.      MORE THAN A DECADE - If the Fed does cut short-term interest rates as expected on Wednesday 7/31/19, it will be the Fed’s first rate cut since 12/16/08, a span of 3,879 days.  The S&P 500 closed at 913 on 12/16/08.  The S&P 500 closed at 3026 last Friday 7/26/19 (source: Federal Reserve). 

 4.      HOME PRICE - The median sales price of existing homes sold in the USA in June 2019 was $285,700, a record price.  However, the median sales price of existing homes sold in July 2006 ($230,200) is equal to $289,750 in today’s dollars, a record price on an inflation-adjusted basis (source: National Association of Realtors). 

 

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