Market News – Week of July 17th, 2017

RETAIL SALES STRUGGLING:

Sales at stores, restaurants and websites fell by 0.2% in June, after falling 0.1% in May.  We had two months in a row of falling retail sales last summer too.  The shift from stores to websites continues as sales at department stores fell 0.7% and online sales rose 0.4%.

NO INFLATION HERE:

In June, the consumer price index was unchanged from the prior month.

IN RETROSPECT:

Looking back on the first half of the year, here is how the various asset classes ranked with the approximate amount of return had you been invested:

Foreign stocks:            14%
U.S. stocks:                   9%
Gold:                              8%
Foreign bonds:              6%
Real Estate:                   3%
U.S. Bonds:                   2.5%
Commodities:               -5%
 

MORE HIGHS FOR STOCKS:

U.S. stocks rose dramatically after Fed Chair Janet Yellen’s tesitimony before Congress.  The economic data for the week was generally negative, but not enough to scare off the optimists and just enough to convince traders that the Fed will delay its next interest rate hike until December.  For the week, the S&P 500* increased 1.41% (up 9.85% for the year).  The MSCI All Country X US* increased 2.95% (up 16.05% for the year).  The Barclays Global Aggregate Bond Index* increased by 0.87% (up 4.41% for the year).  The HFRX Global Hedge Fund Index* increased 0.52% (up 2.56% for the year).

OPIOiD ABUSE IMPACT ON THE ECONOMY:

Opioid abuse contributed to more than 33,000 deaths in 2015 according to the Center for Disease Control.  Last week, Fed chair Janet Yellen cited the opioid abuse problem and related it to the decline in the labor force participation rate in the U.S.  This rate has fallen since the Great Recession and has stagnated near 63% for the last four years.  Ms. Yellen said that she does not know if the opioid epidemic is a symptom of the stagnating labor force participation rate or a cause.  An economist at Goldman Sachs recently stated:  “The opioid epidemic is intertwined with the story of the declining prime-age participation, especially for men, and this reinforces our doubts about a rebound in the participation rate.”  Of course there are additional economic consequences such as massive health care and criminal justice costs.  From 1968 until the late 1980s, drug related deaths per 100,000 in the U.S. hovered at around 4, and it has exploded since then to the current rate of close to 20.

MEDICAID RECIPIENTS NEED TO BE CAREFUL WHEN SWITCHING STATES:

Quoting an email newsletter from Casey Price, an attorney specializing in dementia law: “While Medicaid is a federal program it is administered by the individual states.  That means there are fifty sets of rules relating to asset protection and Medicaid eligibility. Therefore, if someone who needs Medicaid is moving from one state to another you need to make sure that any planning you did in the state they are leaving will work in the state where they are going.”

TRUST:

A Harvard Business Review article entitled “The Neuroscience of Trust” by Paul Zak outlines some conclusions from a decade of research of brain activity of people at work.  He concluded that there are eight management behaviors that foster trust:

• Recognition when it comes immediately after a goal has been met.
• Assigning workers difficult but achievable jobs.
• Give people discretion in how they do their work.
• Enable job crafting (trust employees to choose which projects they will work on).
• Share information broadly.
• Intentionally build relationships (avoid too much focus on completing tasks to the exclusion of building building relationships).
• Facilitate whole-person growth (high trust workplaces help people develop personally as well as professionally).
• Show vulnerability (leaders ask for help rather than just telling colleagues what to do).

References:

TRUST: “The Neuroscience of Trust”, by Paul J. Zak, Harvard Business Review, January-February 2017
OPIOD ABUSE IMPACT ON THE ECONOMY: http://www.cnbc.com/2017/07/13/feds-yellen-believes-opioid-abuse-holding-back-the-us-economy.html
MEDICAID RECIPIENTS NEED TO BE CAREFUL WHEN SWITCHING STATES:  If you wish to get his email newsletter, contact [email protected].
RETAIL SALES STRUGGLING: https://www.wsj.com/articles/u-s-retail-sales-fell-0-2-in-june-1500035684
NO INFLATION HERE: https://www.wsj.com/articles/u-s-consumer-prices-unchanged-in-june-1500035545
IN RETROSPECT: https://horsesmouth.com/midyear-2017-checkin-big-changes-in-investment-market-leadership