Government Shut-Down/Federal Reserve Rate Decision
President Trump has until Friday to negotiate the next round of government spending or face a partial government shut-down. The “Wall” is on the table and being negotiated. Should make for interesting news, to say the least!
On Wednesday we will know whether or not Federal Reserve Chairman Jerome Powell is giving in to political pressures. Will he raise rates as originally signaled with many more to come as he indicated in early October, or will he not raise rates and say we’re close to neutral, as he did a couple weeks ago? The Market wants and needs to have confidence in what the Fed says. As of now, that is in question which is critically impacting the Stock and Bond Markets.
Last week has the Equity Market Indexes down with the Dow off (1.17%), the S&P500 down (1.23%), the Nasdaq Composite off (.84%) and the Russell 2000 down (2.52%).
On the International front, the MSCI EAFE Index was down (.89%) with the MSCI Emerging Market Index down (.95%).
Bonds were up .06% as measured by the Barclay’s Aggregate Bond Index.
With only a couple weeks of trading remaining in 2018, which asset class will finish higher, Stocks or Bonds? WHO WOULD HAVE THOUGHT….This time, a short-time will tell!!
It’s that time of year where we hear all of our so-called experts telling us what to expect in 2019. Typically there are bullish and bearish predictions and usually most, are not correct. Most of what I’ve read thus far, suggests the US Equity Market will range from slightly negative to up around 10%. Many are now jumping on the band wagon that Emerging Market Equities may lead in 2019 because we should see the dollar come down in value.
Most are saying a recession will not happen in 2019. Keep in mind that most prognosticators have not accurately forecast prior recessions. Be careful who you listen too!
Some facts to ponder:
- US Corporate Earnings are up over 20% in 2018 which makes comparisons more challenging the following year. Estimates of Corporate Earnings growth have come down from the high single digits to mid-single digit for 2019.
- The Federal Reserve needs to obtain the confidence of Investors. Without clarification on rates, it’s more challenging to assess the value of the Stock Market.
- Unemployment is at historic lows and wages are moderately increasing.
- Tariffs and their impact?
- The level of Corporate Debt has increased significantly over the last 7 or so years and a large portion matures between 2019 and 2020. This debt needs to either be paid or refinanced. If refinanced, the debt service payments will certainly increase which can impact corporate profits.
- Keep an eye on Brexit!!
- Keep an eye on the Yield Curve!!
Future Inheritances: 37% of US households (45 million out of 121) will transfer assets estimated to be worth $68 Trillion to family heirs and charities over the next 25 years. The $68 Trillion represents 64% of the nation’s total household net worth of $107 Trillion (source: Cerulli Associates).
China: In 1988, 30 years ago, the Chinese economy was 6% of the size of the US economy. In 2008, the Chinese economy was 31% of the size of the US. In 2018, the Chinese economy is 63% of the size of the US. ($13.1 Trillion to $20.66 Trillion)
Life Expectancy: Between 1952 and 2017, the average life expectancy of a newborn American baby increased by 10 years. So, US life expectancy has increased by 1 year every 6.5 years.
Question of the Week
For tax year 2019, what is the total Standard Deduction a couple, married filing a joint tax return, both spouses over 65 is entitled?
d) None of the above
For a listing of all Key Financial Data for 2019, please click here 2019 Preliminary Key Financial Data.
Answer to Last Week’s Question of the Week
Who is eligible to Collect Social Security Benefits?
a) U.S. citizens
b) Green Card Holders
c) Foreign Spouses of Qualifying workers
d) All of the above
The correct answer –
d) all of the above.
For a listing of our Next Social Security Workshop, please click 2019 Social Security Workshops.