Market News – Week of July 16, 2018

INFLATION: The Consumer Price Index (CPI) rose 0.1% in June. The CPI has now risen 2.9% in the last twelve months, the fastest annual pace in over six years. Home and rent costs (about one third of overall consumer spending) is up 3.4% over the last twelve months, and medical care is up 2.5%. Food prices are up only 1.4%.

CORPORATE EARNINGS DRIVE MARKET: Stocks moved higher again this week as the beginning of corporate earnings reports impressed investors. Pepsi, JPMorgan, Chase and Citigroup have all posted profits. Tech firms had a very good week indicating that investors are leaning toward growth stocks. If the season of earnings reports has no major negative surprises, it may crowd out the tariff noise for a while and keep this next part of the summer in positive territory.

THE LONG HOUSING RECOVERY: The U.S. housing market has been in growth/recovery mode since June of 2009, or 109 months. The longest such recovery ever was from March 1991 to March 2001, a recovery of 120 months. Given the number of housing starts and new home sales, there is still room for further expansion. It seems likely that the current recovery will become the longest in the summer of 2019. This recovery started very sluggishly and started from a severe bottom.

WHEN WILL THE ECONOMIC RECOVERY/EXPANSION END? We are currently in the second longest economic expansion on record in the United States. When will it end? The Wall Street Journal recently conducted a survey of private-sector economists, and 59% say it will end in 2020. 22% say 2021. Much smaller percentages predict 2019 or 2022 or later.

TRUCK DRIVER SHORTAGE: With greater economic activity, more stuff needs to get shipped. That means more trucks filled with stuff, and that means more truck drivers. In 2016, the trucking industry was short about 36,000 drivers. That number is expected to surpass 63,000 this year and continue to grow according to the American Trucking Association. It is expected that this industry will add about 90,000 jobs per year if it can fill the positions.

BUT WILL YOU NEED IT?: Will you need long-term care services? If you make it to age 65, chances are you will. An American turning 65 today has a 70% chance of needing some type of long-term care service according to the U.S. Department of Health and Human Services. 20% of those who will need it will need care for more than five years. For women who need it, the average length is 3.7 years. For men, it is 2.2 years.

References:

INFLATION: https://www.wsj.com/articles/u-s-consumer-prices-increase-at-fastest-annual-rate-since-2012-1531398709
BUT WILL YOU NEED IT?: https://horsesmouth.com/longterm-care-what-are-the-odds-you-ll-need-it; https://www.marketwatch.com/story/this-retirement-cost-is-inevitable-and-can-be-insanely-expensive-2017-08-09
THE LONG HOUSING RECOVERY: https://www.calculatedriskblog.com/2018/07/the-longest-economic-and-housing.html
TRUCK DRIVER SHORTAGE: https://www.foxbusiness.com/markets/the-business-thats-trying-to-stop-the-truck-driver-shortage
WHEN WILL THE RECOVERY/EXPANSION END? https://www.wsj.com/articles/economists-think-the-next-u-s-recession-could-begin-in-2020-1525961127