April 3, 2017

The S&P 500 gained +6.1% (total return) in the 1st quarter 2017, giving the widely followed stock index a run of 16 of the last 17 quarters in which it has produced a gain, including the last 6 quarters in-a-row.  The last time that the S&P 500 was up on a total return basis for the 1st quarter yet finished down for the full calendar year was 2002 when the index gained +0.3% for the first 3 months of the year but was down 22.1% for the entire year.  The last time the index gained as much as +6% in the first quarter was 2013, a year that resulted in a +32.4% result for the full year (source: BTN Research).

The US economy grew by +1.6% in 2016, the 11th consecutive year that our domestic economy has failed to grow by at least +3%.  From data tracked by the US government since 1930, the previous longest stretch of “sub +3% annual growth” was just 4 years (source: Commerce Department).

Legislation signed by President Barack Obama on 11/02/15 suspended the US debt ceiling through 3/15/17, i.e., during that 16-month period there was no statutory limit on the issuance of new federal debt.  Since no new legislation has been passed to either increase the debt ceiling or further suspend it, the Treasury Department has announced that they will take “extraordinary measures” to continue to borrow new funds without breaching the 3/15/17 debt ceiling of $19.846 trillion.  These measures should prevent the government from running out of cash until the fall of 2017 (source: CBO).


Notable Numbers

WRONG TREND – Net interest costs of the federal government make up 7% of total federal outlays in 2017.  But the expectation of higher interest rates in the future and rising federal debt levels will push net interest costs to 21% of total federal outlays by the year 2047 (source: Congressional Budget Office).

GRAYING POPULATION – 15% of the US population today is age 65 or older, approximately 1 out of every 7 Americans.  By the year 2047 (i.e., 30 years from now), 22% of the US population will be age 65 or older, approximately 2 out of every 9 Americans (source: Congressional Budget Office).

A FIVE DECADE LOW – The US homeownership percentage (i.e., “owner” households as a percentage of total households) was 63.4% in 2016, the lowest percentage nationwide since 1965 or 51 years earlier when the rate was 63.0% (source: Census Bureau).

COLLECTING TAXES – The IRS audited just 0.7% of individual returns in 2016 (1 in 143).  The number of people audited in 2016 (just over 1 million) dropped for the 5th consecutive year.  The IRS claims that for every $1 spent conducting an audit returns $4 in previously unpaid taxes (source: IRS).