HISTORICAL PERSPECTIVE – Since 1950, there have been 60 different 10-year periods (i.e., the 10-years from 1950-59, 1951-60, 1952-61, … 2009-2018). The S&P 500 index produced an average annual total return of less than +7% during 15 of the 60 decade-long periods (25% of the time). 19 of the 60 periods (32% of the time) resulted in an average annual total return of at least +14%. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).
JUST A ROTTEN DAY – On the day that Janet Yellen was sworn in as Fed Chair (2/03/14), the S&P 500 was down 2.3% (total return), the worst trading day for the index in 2014. On the day that Jerome Powell was sworn in as Fed Chair (2/05/18), the S&P 500 was down 4.1% (total return), the worst trading day for the index in 2018 (source: BTN Research).
HAVE THEY CHANGED THEIR MIND? – The Federal Reserve’s statement following their 1/30/19 meeting suggested to bond market watchers that their next interest rate move could be “down” instead of “up.” The shortest span between the end of a rate-tightening cycle (i.e., raising rates) and the first Fed easing (i.e., cutting rates) in the last 30 years was just 3 meetings over 5 months in 1995, i.e., 2/01/95 rate hike to a 7/06/95 rate cut. The last Fed rate hike took place on 12/19/18 (source: Federal Reserve).
NEW TAX – Democratic Presidential candidate Elizabeth Warren (D-MA) proposed on 1/25/19 an annual “wealth tax” of 2% on household wealth in excess of $50 million and 3% on household wealth in excess of $1 billion. E.g., Jeff Bezos, America’s richest person on the Forbes 400 list in October 2018 (worth $160 billion as of that date) would pay a “wealth tax” of $4.77 billion annually on a net worth of $160 billion (source: BTN Research).
GOOD FOR HOME BUYERS – The average interest rate nationwide on a 30-year fixed rate mortgage was 4.41% last week, down from 4.94% as of 11/15/18 or just 3 months ago (source: Freddie Mac).
SITTING PRETTY – 40% of American homeowners own their home free and clear of any debt, i.e., no outstanding mortgage or existing home equity loan. Of the 60% of homeowners with debt, the median outstanding balance is $126,000 (source: Census Bureau).
SPRING IS IN THE AIR – Training camps for major league baseball teams open this week. The minimum salary for a major league baseball player for 2019 is $555,000. To rank in the top 1% of all US taxpayers (based upon 2016 tax data) required an adjusted gross income level of at least $480,804 (source: MLB).