Bill’s By The Number$

Posted by: Lisa Navarro | Posted on: August 1st, 2022 | 0 Comments

JULY’S PERFORMANCE – The S&P 500 gained +9.2% (total return) in July 2022 but remains down 12.6% YTD (total return). July’s performance was the stock index’s best monthly result since November 2020. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).

DOWNGRADE – This Friday (8/05/2022) is the 11th anniversary of the day S&P downgraded the USA on 8/05/2011 of the top-rating that America had held for 70 years. The yield on the 10-year T-note was 2.57% on 8/05/2011. The yield on the 10-year T-note closed at 2.64% on Friday 7/29/2022 (source: Treasury Department).

INVERTED – Each of the 8 recessions that have occurred in the USA since 1969 have been preceded by an “inverted” yield curve, i.e., the 2-year Treasury note yield exceeding the 10-year Treasury note yield. As of last Friday (7/29/2022), the 2-year note yield has exceeded the 10-year note yield for 18 consecutive trading days. The 2022 inversion is a function of the 2-year note yield quadrupling since the beginning of this year, reacting to Fed rate hikes that are expected to drive down inflation (source: Treasury Department).

FED ACTION – The Fed raised short-term rates by 0.75 percentage points last Wednesday 7/27/2022, its 4th rate hike since 3/16/2022, making it a total of 2.25 percentage point increases this year (source: Federal Reserve).

STOCKS AND RATE HIKES – Between 2/04/1994 and 2/01/1995, the Fed raised interest rates 7 times. 4 of the 7 rate hikes were at least 0.50 percentage points, a total increase of 3 percentage points for all 7 rate hikes. That took the Fed’s target short-term rate from 3.0% to 6.0%. From the close of trading on 2/04/1994 to the close of trading on 2/01/1995, the S&P 500 gained +3.0% (total return) over the 1-year (source: BTN Research).

HOME SELLING – When the pandemic started (January 2020), the median sales price of existing homes sold in the USA was $266,300. In June 2022, the median sales price of existing homes sold in the USA reached a record $416,000 (source: National Association of Realtors).

OOPS! – The city of Chicago decided in 2020 to raise property taxes in 2021 and beyond based on our nation’s rate of inflation up to a maximum increase of 5% in any single year, i.e., inflation to be measured by the nationally calculated “Consumer Price Index” (source: Property Tax Extension Limitation Law).

THIS WILL CHANGE IN THE FUTURE – 91% of the 128 million households in the USA own at least 1 car, SUV or light-duty truck, a total of 250 million vehicles. Surprisingly, electric cars and trucks make up just 2 million of the 250 million vehicles in our country today (source: Census Bureau).

BETTER THAN LAST YEAR – The budget deficit of the US government after 9 months of fiscal year 2022, i.e., the 9 months from 10/01/2021 through 6/30/2022, is $515 billion. Over the same 9 months during fiscal year 2021, the budget deficit was $2.24 trillion, while over the same 9 months during fiscal year 2020, the budget deficit was $864 billion (source: Treasury Department).

YOU PROMISED – The “aggregate funded ratio” of state and local pension plans across America is 77.9%, i.e., the pension plans’ assets divided by the present value of the pension plans’ liabilities. Since 2001, the ratio has been as high as 95.1% (2001), as low as 62.4% (2009) and was 84.8% in 2021 (source: Equable Institute).

SAVING FOR THE WINTER – The 27-nation European Union announced on 7/26/2022 that all member countries are to reduce their natural gas consumption by 15% over the 8 months that begin today, i.e., 8/01/2022 through 3/31/2023. The EU is concerned that Russian-supplied natural gas could end with little notice (source: EU).

THEY NEED MORE TIME – On 7/20/2022 Ukraine received preliminary approval from its government creditors and from the bondholders of its sovereign debt to suspend all debt repayments for at least 17 months, i.e., from 8/01/2022 through at least 12/31/2023 (source: Financial Times).

NOT HERE – 30 years ago, 37% of the semiconductors made in the world were manufactured in the USA. Today just 12% of semiconductors made in the world are manufactured in the USA (source: Aspen Ideas).

GREENER GRASS? – 40% of 13,000 workers surveyed worldwide between February and April of this year are “considering quitting” their current jobs within the next 3-6 months (source: McKinsey and Company).

HE’S AMBIDEXTROUS – Jim Kaat won 283 games as a major league baseball pitcher over a 25-year pro career (1959-1983). Kaat, inducted into baseball’s Hall of Fame at age 83 on 7/24/2022, “shot his age” in golf both as a left-hander and as a right-hander over a 2-week stretch in 2013 after turning 75 years old (source: MLB).