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April 11, 2016

It was 2 months ago today (2/11/16) that the price of crude oil in the United States fell to $26.21 a barrel. At that level (down 29% in just 6 weeks), domestic oil and gas companies found themselves laying down rigs and laying off employees as they faced the reality of diminishing revenue. But from that February 2016 low point, the price of crude oil has climbed back +52% to close at $39.72 a barrel on Friday 4/08/16. Good news for the oil industry: $39 a barrel is at the low-end of the break-even price required for US oil producers to profitably pump oil over the long term (source: Deutsche Bank).

Even though the fears of additional interest rate hikes by the Fed in the near term have faded, stocks haven’t capitalized in the way most equity watchers would have expected. The headwind that has slowed US stocks is the apprehension over the growth of corporate earnings. A slowing of the purchasing power of American consumers may explain the quandary. After adjusting numerical data from the past for the impact of inflation, the median household income from 1997 ($54,443) is higher than the median household income ($53,657) today. Since people can’t spend money they don’t have, the previous stat suggests that the buying power of many Americans has backed up over the last 2 decades (source: Federal Reserve Bank of St. Louis).

In the 8 months since the August 2015 bailout of Greece (valued at 86 billion Euros) was announced, the Internal Monetary Fund has been working behind the scenes to extract debt concessions of behalf of the Greeks. Germany, the Greeks’ largest creditor, has been reluctant to agree to any debt relief. The next large debt payment for the Greeks comes due in July 2016, at which time the Greeks may be seeking their 4th bailout in just the last 6 years (source: BTN Research).

Notable Numbers

TIME FLIES – The S&P 500 bull market that began on 3/09/09 is now in its 86th month. The average bull market for the index since 1950 (including the current bull) has lasted 60 months (source: BTN Research).

IT’S DIFFERENT TODAY – 40% of college undergraduates today are at least 25 years old (source: Thomas B. Fordham Institute’s Education for Upward Mobility Conference).

PLEASE CAST YOUR BALLOT – National elections will be held 30 weeks from tomorrow (on 11/08/16) for the White House, 34 Senate races and all 435 House seats (source: BTN Research).

NOT UP TO SNUFF – The 75-year (1941-2015) average growth rate of the US economy (i.e., “Gross Domestic Product” annual growth rate) is +3.5% per year. The actual growth rate of the US economy has reached +3.5% or greater in only 1 of the last 15 calendar years (source: Commerce Department).

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