Market News – Week of June 5th, 2017

UNEMPLOYMENT RATE TICKS DOWN:

The unemployment rate in the U.S. dropped to 4.3% in May as the economy added a total of 138,000 jobs.  At 4.3%, this is the lowest unemployment rate since 2001.  The May labor report was generally positive but the number of new jobs was less than expected, and the Labor Force Participation Rate decreased to 62.7% (percentage of working age populaton in the labor force).  With the modest number of new jobs, it really was the decrease in labor force participation that lowered the unemployment rate.  However, on a positive note, the number of people working part time for economic reasons decreased in May to its lowest level since March 2008.  The alternate measure of unemployment that takes this into account (the so-called U-6 unemployment rate) decreased to 8.4%, the lowest level since November 2007.

NEW RECORDS AGAIN:

The S&P 500 closed on Friday at 2,349.07, a record high.  The Dow Jones Industrial Average closed at 21,206.29, also a record.  For the week, the S&P 500* increased 0.96% (up 8.94% for the year).  The MSCI All Country X US* increased 1.35% (up 15.64% for the year).  The Barclays Global Aggregate Bond Index* edged up by 0.18% (up 4.25% for the year).  The HFRX Global Hedge Fund Index* increased 0.20% (up 2.59% for the year).

WHAT WILL THE FED DO WITH INTEREST RATES?:

The Fed meets again on June 13-14.  Will it raise interest rates again?  The consensus is pointing to a ‘yes’.  One key indicator for the Fed is the unemployment rate which just hit a 16-year low.  However, the other key indicator is inflation, which it wants above 2%, but this rate has unexpectedly slowed.  Fed officials have recently indicated that they believe the slowdown in inflation in March and April is temporary, opening the door for a rate increase in June and possibly one more before the end of the year.

DON’T LEND MONEY TO ILLINOIS:

So says Moody’s Investor Services and S&P Global Ratings which both downgraded the state’s bond rating to one step above “junk” this past week.  It may get downgraded again if a budget stalemate isn’t resolved by July.

“GO SOUTH OLD PEOPLE”:

This is a variation of the words “Go west young man, and grow up with your country”, penned by Horace Greeley in 1865 in the New York Tribune.  Now, it seems that there is a growing trend for older Americans to retire to Central or South America.  It is difficult to measure exactly how many Americans are doing this, but the Social Security Administration was sending payments outside the U.S. to 380,000 retired U.S. workers in 2014, which was up 50% from 2004.  This is only expected to increase as Baby Boomers retire in greater numbers.  In a recent census in Cuenca, Ecuador, there were approximately 10,000 foreign retirees, most from Texas or Florida.  In Cuenca, city of about 350,000 people, a two bedroom, two and a half bath apartment goes for about $400 per month and a solidly upper class lifestyle costs about $1500 per month.  According to Investopedia, you can retire lavishly in Ecuador with only $200,000 of life savings.  There are many other growing “hot spots” for retirement in the region including Panama, Costa Rica, Colombia, and Nicaragua.

IF YOU WANT TO PROTECT YOUR ASSETS FROM CHILD SUPPORT CLAIMS…GO TO NEVADA:

Seventeen states have passed Domestic Asset Protection Trust (DAPT) laws.  These trusts allow the creator of the trust (the “settlor” or “grantor”) to also be a beneficiary, transfer assets to the trust and protect those assets from creditors.  There are a variety of requirements to set these up successfully.  Even if you set it up successfully, most states allow for certain creditors to get the assets even though the assets are in a DAPT.  One of the common exceptions is child support.  Delaware has such an exception.  Delaware always wants to be a leader in trust and corporate laws, and yet even Delaware was not willing to go that far.  Nevada was, and in a case that was just unanimously decided, Klabacka v. Nelson, the Supreme Court of the State of Nevada upheld this protection.

References:

IF YOU WANT TO PROTECT YOUR ASSETS FROM CHILD SUPPORT CLAIMS…GO TO NEVADA: LISI Asset Protection Planning Newsletter #343, (May 30, 2017) at http://www.leimbergservices.com  Leimberg Information Services, Inc. (LISI).
“GO SOUTH OLD PEOPLE”: http://www.charlotteobserver.com/news/nation-world/world/article154209369.html; http://www.travelerstoday.com/articles/39791/20170218/want-retire-latin-america-here-five-best-countries.html; https://www.forbes.com/sites/nextavenue/2017/01/03/international-livings-10-best-places-to-retire-around-the-world-in-2017/#199615526983
UNEMPLOYMENT RATE TICKS DOWN:  http://www.calculatedriskblog.com/2017/06/may-employment-report-138000-jobs-43.html; http://www.marketwatch.com/story/us-creates-138000-jobs-in-may-unemployment-43-2017-06-02
DON’T LEND MONEY TO ILLINOIS:  https://www.bloomberg.com/news/articles/2017-06-01/illinois-bonds-cut-to-one-step-above-junk-by-s-p-over-stalemate
WHAT WILL THE FED DO WITH INTEREST RATES?:  https://www.wsj.com/articles/fed-focuses-on-job-gains-as-economy-sends-mixed-messages-1496395804