April 24, 2017

The best that Congressional lawmakers can hope for at this late date is a “Continuing Resolution” to maintain the existing funding levels from fiscal year 2016 into fiscal year 2017, the latter being a 12-month period that by next Sunday (4/30/17) will be half over.  If either political party complicates the legislative process with another agenda, we could see a government shutdown, our first since Washington stopped business for 16 days in early October 2013 (source: BTN Research).

Equity investors have had a number of excuses to pick from that may have motivated them to “sell stocks” and “buy bonds” recently, e.g., ongoing Washington gridlock and geopolitical risks in North Korea and Syria.  The appetite for US Treasuries sent the yield on the 10-year note down to 2.17% last Tuesday (4/18/17), its lowest level in 5 months.  The average nationwide interest rate on a 30-year fixed rate mortgage dropped below 4% last week (3.97%) for the first time since mid-November 2016 (source: Freddie Mac).

The upcoming week will produce a combination of Washington politics and Main Street economics.  180 of the companies in the S&P 500 index (36% of the firms) will release their 1st quarter 2017 earnings this week.  The S&P 500 is up +5.5% YTD (total return), down just 0.5% for April with 1 trading week remaining in the month (source: CNBC).


Notable Numbers

TIGHT RANGE – Through last Friday 4/21/17, the S&P 500 has just 2 trading days YTD that produced at least a 1% total return gain or loss, compared with 30 on the same date in 2016.  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).

BETTER AFTER SEVEN YEARS – As of Friday 4/21/17, only 3 banks in the United States have failed YTD and required a bailout from the Federal Deposit Insurance Corporation (FDIC).  As of 4/21/10, 50 banks had failed YTD.  Just 5 banks failed during all of calendar year 2016 (source: FDIC).

A LOT MORE RENTERS – As of the end of 2016, there were 118.6 million households in the United States, split 64/36 between homeowners (75.6 million) and renters (43.0 million).  Since the end of 2011 (i.e., 5 years earlier), the number of homeowners (75.3 million as of 12/31/11) has increased by just +300,000 while the number of renters (38.8 million as of 12/31/11) has increased by +4.2 million (source: Census Bureau).

ONE BAD, ONE DISMAL – The “debt-to-economy” ratio for Greece is 167%, i.e., $326 billion of debt stated as a percentage of the $195 billion Greek economy.  The “debt-to-economy” ratio for the USA is 105%, i.e., $19.846 trillion of debt stated as a percentage of the $18.8694 trillion American economy (source: Commerce Department).