Market News – December 30, 2019

SHORT AND SWEET:  We had a short week for the markets due to the holiday, and it ended well, once again in record territory.  Easing trade tensions and improving economic data have created a positive stock trading environment.  Strong consumer spending data was the latest data point to buoy investors.  Amazon was a natural beneficiary of such data as that stock rose 4.4% on Thursday alone.  Beleaguered Boeing helped the rally as its changes to top leadership caused investors to be bullish about the stock again.

HOW DID THE 2010S DO?:  Over the course of the last nine decades, the U.S. stock market has had two decades where the returns were a little negative, the 1930s and, of course, the 2000s (the worst decade of the bunch).  The 1940s, 1960s and 1970s were all below average.  The 1950s, 1980s and 1990s were well above average.  The 2010s looks like it will end a little above average at about 13% average returns.

DURABLE GOODS DOWN:  In November, orders for durable goods in the U.S. decreased by 2%.  Much of the decline was due to a sharp decrease in governmental orders for defense aircraft and parts.  If that one thing was taken out of the data, then durable goods orders would have been up nearly 1%.  This statistic does need to pick up to create confidence that manufacturing will remain healthy.  Current sentiment on that front is not strong.

WAGES RISING FOR LOWER EARNERS:  With unemployment at very low rates, many have expected that employees would eventually reap the benefit of higher wages.  With a tighter job market, employers should feel the pressure to raise wages to attract and retain workers.  This theory is becoming reality.  Pay for the bottom 25% of wage earners rose by 4.5% in November from a year earlier.  For the top 25%, wages rose 2.9%, a welcome trend.  For production and nonsupervisory workers in general, wages were up 3.7% in November from a year earlier while wages for all employees was up 3.1%.  Moreover, the unemployment rate for high school dropouts has decreased from 7.8% three years ago to 5.3% today.  Some of the wage increases may be supported by the fact that 29 states have increased minimum wages above the federal level.

2017 TAX LAW HAS BROUGHT BACK CASH:  One of the goals of the 2017 tax law was to provide an incentive to corporations to bring back lots of overseas profits.  The existing tax law, it was argued, made it too costly to bring that cash back to the U.S., and so it stayed overseas.  Last week, Bloomberg News reported that corporations have brought back more than $1 trillion in overseas profits since Congress passed that bill.  In the third quarter of 2019, $95.3 billion was repatriated to the U.S.  At the time the law was passed, it was estimated that corporations held between $1.5 and $2.5 trillion in offshore cash.

REFERENCES:

SET WORKABLE GOALS FOR 2020: https://www.wsj.com/articles/want-to-reach-your-savings-goal-in-2020-heres-what-the-research-says-will-help-11577356205?emailToken=33694e22c2d1e04e8fcb74c9be8c6512DEXdWF492alYJ5G+IWOEHLeIgFKm01LMTg5btzbWDdlswcFqTr+fg18XPQh8RjvUizO3WvB2xVOgR8QiqMG4F+tA7hg6mziosoXwxj+TO9Axi4CyaCgcnde1BVduCHnB31fMWB2kQ1TAe8+6jese8Q%3D%3D&reflink=article_email_share
WAGES RISING FOR LOWER EARNERS:  https://www.wsj.com/articles/rank-and-file-workers-get-bigger-raises-11577442600
DURABLE GOODS DOWN:https://www.marketwatch.com/story/us-durable-goods-orders-sink-in-november-by-most-in-six-months-2019-12-23
HOW DID THE 2010S DO?: https://www.horsesmouth.com/stocks-bonds-bills-inflation-returns-for-the-94-years-ending-december-2019
2017 TAX LAW HAS BROUGHT BACK CASH: https://www.bloomberg.com/news/articles/2019-12-19/u-s-companies-repatriated-cash-hits-1-trillion-under-tax-law