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September 26, 2016

It wasn’t a unanimous decision, but the Federal Reserve is not yet convinced that the American economy is strong enough to sustain a rate hike.  When the Fed met last week, its 6th of 8 scheduled meetings in 2016, the vote was 7-3 to hold short-term rates steady.  But post-meeting comments from Fed Chair Janet Yellen were “hawkish” in nature, a sharp contrast from the “dovish” position she has maintained since taking over the reins of the nation’s central bank in February 2014.  Yellen cautioned that “we don’t want the economy to overheat,” a clear signal that our strengthening financial system will move the Fed to raise rates, possibly even later this year (source: Federal Reserve).

The first of 3 debates between Hillary Clinton and Donald Trump will take place Monday night in Hempstead, NY.  Voters in 4 states have already begun casting their ballots.  Early voting started last week in Minnesota, New Jersey, South Dakota and Vermont.  35% of the 129 million Americans that voted in the 2012 presidential election cast their ballots before Election Day (source: BTN Research).

Fiscal year 2017 for the US government (i.e., the 12 months from 10/01/16 to 9/30/17) begins this upcoming Saturday.  Spending projections released in mid-September forecast record expenditures of $4.073 trillion for the next fiscal year.  Outlays have grown from $1 trillion in 1987 to $2 trillion in 2002 to a projected $4 trillion in 2017 (source: Office of Management and Budget).

 

Notable Numbers

LONG TERM vs. SHORT-TERM – The all-time closing high for the S&P 500 was 2190 on 8/15/16.  The average return for the index for the 5 years ending 8/15/16 was +15.2% per year (total return), half again as large as the +9.7% per year average for the index over the last 50 years (1966-2015).  The S&P 500 consists of stocks chosen for market size, liquidity and industry group representation.  It is a market weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).

BIGGER THAN HUGE – The US bond market (including treasury, municipal, corporate, mortgage and asset-backed debt) was worth $40.7 trillion as of 6/30/16.  The US bond market was worth $12.4 trillion as of 12/31/96 (source: Securities Industry and Financial Markets Association).

NEED TO CHANGE THIS – The top marginal corporate tax rate in the United States is the 3rd highest in the world out of 188 countries.  Only the United Arab Emirates (UAE) and Puerto Rico have a top marginal corporate tax rate that is higher than the USA’s (source: Tax Foundation).

EXPENSIVE TO LIVE – 11% of American homeowners spend at least 50% of their pre-tax income on their housing costs.  26% of American renters spend at least 50% of their pre-tax income on their housing costs (source: Joint Center for Housing Studies at Harvard University).

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