Weekly Market Review: June 3, 2019

Weekly Market Review: June 3, 2019

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The stock market’s run of four straight “up” months ended last week as the trade battle that has dominated headlines expanded to another country. The S&P 500 dropped 6.4% in May (total return), making the index’s +10.7% YTD performance less than satisfying. The latest threatened tariffs – directed at Mexico – are to be implemented in just one week (5% on June 10) and could increase fivefold to 25% in four months on October 1. American corporations that have shifted manufacturing plants to Mexico are at the greatest risk. These companies make their products in Mexico – benefiting from lower labor costs – and then import the goods into the U.S. for sale to American consumers, a transaction that would be subject to the new 5% tariff (source: BTN Research).

When stock owners become stock sellers, many of those investors become bond buyers. The surge of money coming to Treasury notes (10-year paper) and bonds (30-year paper) last month drove sovereign debt prices up and yields down. The yield on the 10-year Treasury note dropped from 2.50% to 2.13%, resulting in a +3.1% price increase and the yield on the 30-year Treasury bond dropped from 2.93% to 2.57%, resulting in a +7.2% price increase (source: Treasury Department).

The price of oil fell more than $10 a barrel in May – from $63.91 to $53.50 – as oil traders evaluate the possible impact of proposed tariffs on the global economy. Slowing economies could mean a reduced demand for crude oil. Ironically, U.S. oil producers reported last week production of 12.3 million barrels a day of crude – the largest weekly total in U.S. history (source: Department of Energy).

Notable Numbers for the Week:

  1. DECLINING RATE – Of individual tax returns filed in calendar year 2010, 1.11% were audited or 1 out of every 91 returns. Since then, the audit rate has fallen for 7 consecutive years to 0.59% for individual tax returns filed in calendar year 2017, equal to 1 out of every 169 returns (source: IRS Data Book).
  2. THIS IS THE MONTH – The month of June has had the greatest number of existing homes sold during each of the last 5 calendar years (2014-2018). 570,000 existing homes were sold in June 2018, an average of 19,000 a day nationwide (source: National Association of Realtors).
  3. IT’S A JOB – An estimated 40% of this year’s college graduates will be “underemployed” with their first job, i.e., they will take a job for which they are academically overqualified (source: Strada Institute).
  4. POTUS – The 2020 presidential election takes place on 11/03/20 or 17 months from today. 23 Democrats have announced their run for the White House, including 6 women and 17 men (source: New York Times).

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This material does not constitute a recommendation to engage in or refrain from a particular course of action. The information within has not been tailored for any individual. The opinions expressed herein are those of Michael A. Higley as of the date of writing and are subject to change. MML Investors Services, LLC (MMLIS) provides this article for informational purposes, and does not make any representations as to the accuracy or effectiveness of its content or recommendations. Mr. Higley is not an employee of MMLIS and any comments, opinions or facts listed are those of Mr. Higley.

This commentary is brought to you courtesy of MML Investors Services, LLC (Member FINRA, Member SIPC). Past performance isn’t indicative of future performance. An index is unmanaged and one cannot invest directly in an index. Material discussed is meant for informational purposes only and it is not to be construed as specific tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, it is not guaranteed. Please note that individual situations can vary, therefore, the information should be relied upon when coordinated with individual professional advice. Clients must rely upon his or her own professional advisor before making decisions with respect to these matters.