Statistic of the Week:
Debt is becoming an increasing problem for US households (again). 33% of Americans have debt that has gone into collections, with that figure exceeding 50% in some Southern counties. The state with the highest rate: Louisiana where 46% of the population has debt in arrears. The state with the lowest rate: Minnesota at 17%.
We have been receiving several key 2017 GDP growth figures over the past couple weeks. The US, UK, and euro zone have all reported. The euro zone saw their GDP tick up 2.5% over the course of the year – the best performance since 2007. The US grew 2.3% (around analyst expectations), and the UK logged its slowest expansion since 2012 at 1.8%. These figures are likely to be revised.
Market Moving Events:
Monday: ISM Non-Manufacturing Index Tuesday: International Trade, JOLTS Wednesday: Consumer Credit Thursday: Jobless Claims Friday: Wholesale Trade
With almost no economic “bad news” in circulation, investors turned to a “good news is bad news” psyche last week, pushing down global markets. The DJIA had its worst week in two years,1 as it retreated 4.12% on the week.2 The S&P 500 held up a little better, dropping 3.85%.3 Both of the indices are still in the black for the year, up 3.24% and 3.31% respectively.4 The selloff in equities was spurred last Monday by a rise in interest rates and the fear that the era of “easy money” may be coming to an end. Friday’s wage (chart right) and unemployment figures further stoked this concern. The 10-year Treasury hit a yield of 2.85% Friday.5 For some time we have been expecting volatility to work its way back into the investment markets. Volatility helps make a market, as sellers think they are selling high, and buyers believe they are shopping bargains. The recent lack of volatility may make this current bout feel abnormal; we believe it to be part of a regular market cycle. The media is not helping matters. While we encourage our clients to look at the S&P 500 as the best measure of equities in the US, the mainstream media focuses on the Dow. We frequently heard last week about the “huge” point drops in the index. We focus on percentages, not points. For example: in September 2010, the DJIA was at 10,000. A 600 point drop would have been a full 6% drop. Today, at nearly 26,000, that same 600 point retreat comes in at 2.56%. Painful, yes – but illustrative nevertheless. - Dan McElwee, CFP®
Chart of the Week: