Statistic of the Week:
Having a high income does not equate to being wealthy. How much do you think America’s millionaires are spending on automobiles? The figure may surprise you. Only 10% of households between $1 to $5 million spend more than $25,000 on a car. For households worth over $5 million, only 22% spend at that level.
Many eyes across the world are focused on the price of bitcoin. The crypto currency passed $10,000 / coin for the first time last week – then surged to $11,000. Only to fall 20%. (This all occurred in a “matter of hours.”) The wild volatility in the vehicle has caused many to call it a “bubble,” but that has not deterred more from jumping onto the crowded trade.
Market Moving Events:
Monday: Factory Orders Tuesday: International Trade, ISM Non Manufacturing Index, PMI Services Index Wednesday: Productivity and Costs Thursday: Jobless Claims, Consumer Credit Friday: Employment Situation, Consumer Sentiment, Wholesale Trade
Volatility surged back into the markets last week as politics and investors met head on. The surprise guilty plea from General Michael Flynn coupled with the Senate’s passing of its version of the tax reform bill sent equity prices along a bumpy road Friday. (Not to mention things continuing to heat up on the Korean peninsula). Despite all that, the DJIA and S&P 500 ended the week in the black, while the NASDAQ retreated. The Dow had an outsized gain, up just under 3%,1 while the S&P 500 experienced a more moderate climb of 1.53%.2 The passage of the tax bill in the Senate may spur a rally in small and mid size companies. Fixed income was largely unchanged on the week. The 10-year Treasury closed Friday with a yield of 2.37%.3 We are frequently being asked, “Who does this tax bill help?” It is our belief that this bill will help US corporations first, the US economy second, and some US households third. Should the corporate tax rate be cut from 35% to 20%, approximately $10 of earnings per share would be added to the S&P 500.4 This move would take 2018 earnings from a projected $141 to $151 per share5 – helping to make stocks relatively less expensive after this year’s run. It would also explain why we have seen a recent uptick in value stocks while growth names have rotated sideways or lower. Stronger corporate earnings, and a more competitive tax code will undoubtedly help US companies on the global stage. But, questions remain as to how much of this windfall will “trickle down.” - Dan McElwee, CFP®
Chart of the Week: