The month of October is infamous on Wall Street for the massive stock market drop that took place on “Black Monday” (a one-day loss of more than 20% on 10/19/87), but lesser known is that three of the top four daily gains for the S&P 500 index in the last 70 years also took place in October. Just over six months ago, the S&P 500 gained +9 .4% (total return) on 3/24/20, the index’s third best trading day since 1 /01 /50 (source: BTN Research).
The United States tracks “personal income” of its citizens, i.e., a monthly estimate of all pre-tax income created from employment and investments. Even though Americans can spend money they don’t have (resulting in credit card debt, mortgage debt, auto debt), history tells us that most Americans definitely love to spend money that they do have. That’s why last week’s report that showed “personal income” had declined 2.7% on a month-over-month basis from July to August, its third down month in the last four months, threatens to slow our much-needed economic recovery (source: Commerce Department).
The Federal Reserve announced on 9/16/20 that they expect rates to remain near zero “at least through 2023 to help support our recovery.” Long-time market watchers understand that predictions made by our nation’s central bank are not infallible. Just three years ago (9/20/17), the Fed released a forecast for the end of 2020 for its key short-term interest rate and for our country’s unemployment rate. Their predictions: The Fed funds rate would be 2.9% and our jobless rate would be just 4.2%. The actual numbers as of today: The Fed funds rate is 0% to 0.25% and our jobless rate is 7.9% (source: Federal Reserve).
Notable Numbers for the Week:
- BIG NUMBERS – The NASDAQ Composite is up +25.3% YTD (total return) through the close of trading on
9/30/20. The NASDAQ Composite has gained at least +20% in 4 of the last 11 years, i.e., 2009-2019. The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system (source: NASDAQ).
- BEING CAREFUL – Since the beginning of 2020, the size of the money market fund industry in the USA (both taxable and tax-free) has grown from $3.63 trillion as of 1 /01 /20 to $4.40 trillion as 9/30/20, a YTD increase of$770 billion or $20 billion a week (source: Investment Company Institute).
- SIMPLER – As a result of the expansion in the size of the standard deduction in the “2017 Tax Cuts and Jobs Act,” only 10% of tax filers itemized in 2018, down from 30% in 2017 (source: Tax Foundation).
- TWO STATES – Even though crude oil is produced in 32 U.S. states, just two states (Texas and North Dakota) are responsible for 52% of the nation’s crude oil production (source: Energy Information Administration).
Mark R. Reimet, CFP®
CERTIFIED FINANCIAL PLANNER™