Market News – Week of April 30th, 2018

U.S. ECONOMY GROWS BY 2.3% ANNUAL RATE IN FIRST QUARTER: The gross domestic product of the U.S. grew by an annual rate of 2.3% in the first quarter. This represented a bit of a slowing from the 2.9% rate in the fourth quarter of 2017, but it was above what most expected. It was also the best first quarter reading since 2015. Consumers eased back on their spending with a 1.1% increase after the prior quarter saw a 4.0% increase. Savings rates also increased. It seems that after holiday shopping, and replacing cars damaged by hurricanes, consumers pocketed their extra money (wages are increasing and taxes decreasing) for a rainy day. Spending in the business sector showed no such signs of pulling back. Spending on buildings, equipment, software, etc., grew by a 6.1% rate. Businesses also added to their inventories which indicates they believe consumer spending will be healthy.

WOBBLE: Markets wobbled this week, ending up pretty much where they started on Monday. Corporate earnings reports have been mixed, and market reactions followed suit. Caterpillar had a great report, but cautioned that the first quarter could be its peak for the year. Alphabet’s report showed a significant increase in expenses. On the other hand, the tech giants had a good week with Facebook rising 4.4% and Amazon rising 3.6%. With half of corporate earnings reports in, we are on track for above 20% year-over-year earnings growth. Stocks in Asia got a bounce from the unprecedented meeting between the leaders of North and South Korea.

NEW NAFTA DEAL?: After four days of high level meetings, representatives from the U.S., Mexico and Canada failed to reach a deal, but agreed to meet again on May 7. One of the more difficult issues was the question of how much content in a vehicle should be sourced from within the NAFTA region to qualify it for duty-free status. The current standard is 62.5% and the U.S. is insisting on raising it to 85%.

MOST AMERICANS ARE NOT SAVING ENOUGH: About 61% of Americans have less than $100,000 in total savings and 42% of those people have saved less than $10,000. The primary reason people give for not saving is that they do not earn enough.

WHAT WOULD YOU DO?: From 1968 to 2001, U.S. per capita income doubled. The income levels that many baby boomers were born into was roughly half of what they now enjoy. Are we happier? Are we more financially secure? Are we saving a whole lot more money, or giving away a lot more money? As a financial advisor, one thing that has struck me again and again is that when people see increases in income, even sharp increases, they very quickly adjust their spending habits to account for the increased income. Without a lot of thought, discipline and/or help, that money is generally consumed.

COUPLES NEED TO TALK ABOUT MONEY: The biggest stress factor for couples is money, by a long shot. In a recent survey, 54% of respondents cited “money” (54%) as the number one stressor in their relationship. In a distant second was communication at 26%. Other stressors were work (7%), in-laws (7%), and children (6%). The best cure for couples regarding money is communication. Share all financial information and talk about it often. Spending and saving decisions should be shared. Often one of the two will be more interested and pay closer attention and perhaps do more of the work. But that does not obviate the need for communication, it only enhances it. Especially when things get tight, strategize together as to how to meet the challenge. I have seen this modeled very well with many of my clients. One married couple that I work with meets every Saturday for a quick review of their financial situatiion, spending decisons, and the like. They were in a very difficult situation when they started this, but even after that improved, it works well for them. However you do it, keep each other in the loop. Trust each other.

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