Week of January 20, 2020

1.      STOCKS OVER TIME - As of 12/31/19, the S&P 500 was “up” 74 of the last 100 months (74%), 140 of the last 200 months (70%) and 202 of the last 300 months (67%).  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).          

2.      TRUMP STOCK MARKET – Donald Trump was sworn in as the nation’s # 45 president 3 years ago today (1/20/17).  The S&P 500 has gained +16.0% per year (total return) over the 3 years.  That result is above the index’s trailing 50-year average annual return of +10.6% achieved over the 5-decade period from 1970-2019 (source: BTN Research). 

3.      NOT EXPANDING BUT SHRINKING - The economies of 9 of the 50 US states are forecasted to “contract” over the next 6 months, the greatest number of states projected to suffer economically since July 2009.  The 9 states are West Virginia, Pennsylvania, Delaware, Montana, Oklahoma, Vermont, New Jersey, Kentucky and Connecticut (source: Federal Reserve Bank of Philadelphia).   

4.      CONCENTRATED - There are 3,142 counties in the United States.  Just 31 counties, or 1% of 3,142, produce 32% of the nation’s GDP.  Gross Domestic Product (GDP) is the annual market value of all goods and services produced domestically by the US (source: Bureau of Economic Analysis).   

5.      REALLY LOW - Inflation, as measured by the “Consumer Price Index” (CPI), was up +2.3% for 2019.  For the decade of the 2010s, inflation was up just +1.8% per year, the lowest decade of inflation in the USA since the 1930s.  By comparison, the decade of the 1970s suffered +7.4% annual inflation (source: Department of Labor). 

6.      A KILLER - Heart disease is responsible for almost 1 of every 4 deaths (23%) in the United States annually, i.e., 647,000 deaths out of 2.835 million total deaths in 2019 (source: Center for Disease Control). 

7.      THEY OWN IT NOW - Banks foreclosed on 143,955 homes nationwide in 2019, down 37% from 230,305 foreclosures in 2018 and down 51% from 291,579 foreclosures in 2017.  The worst single month of foreclosures in US history – 102,134 foreclosures in September 2010 (source: ATTOM Data Solutions).      

Diversification Benefits of 'Sailing & Rowing' Investment Strategies

It’s easy for advisors to become complacent about portfolio structure by focusing mainly on investments that fit well with the present environment. As the current 10-year bull market marches on, there is a natural bias toward investments that participate in the market’s gains. But the temptation to ride the current wave of growth may be leaving clients exposed to unnecessary risk.

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8.      PAYING FOR STUFF - 64% of 4,441 Americans surveyed in the 4th quarter 2019 indicated they “strongly or somewhat agree” that a “wealth tax” on the “very rich” is an appropriate method to “support public programs” in the United States (source: Reuters/Ipsos Poll).   

9.      DOWN FROM SEVENTY PERCENT - The top marginal income tax rate for individual taxpayers has been reduced 8 times since 1980, i.e., 8 times in the last 40 years (source: Tax Policy Center).  

10.   I HAVE TO TELL YOU EVERYTHING? - The IRS estimates that US taxpayers voluntarily pay 83.6% of the federal income taxes that would be paid if all taxpayers were completely honest, the result of tax returns not being filed, income being underreported, and taxes being underpaid.  IRS enforcement, i.e., audits, has increased the “net compliance rate” to 85.8% (source: Internal Revenue Service).    

11.   CHANGE IN THE LAW - The newly passed SECURE Act allows Americans to withdraw money from a pre-tax 401(k) or IRA without paying a 10% penalty for an “early withdrawal” if the funds are used to cover costs related to childbirth or adoption.  The withdrawal would be subject to ordinary income tax.  Please consult a tax expert for details (source: SECURE Act). 

12.   MORE WOMEN THAN MEN - For the 1st time since April 2010, women make up the majority of the US workforce.  As of the end of December 2019, there were 76.246 million American women working full-time, vs. 76.137 million American men.  In the last 12 months, 1.52 million working women have secured jobs, more than double the 586,000 men that have joined the workforce (source: Department of Labor).      

13.   WHAT IF? - The average interest rate paid by the US government on its interest-bearing debt was 2.429% as of 12/31/19, more than two percentage points less than the 4.508% paid as of 12/31/04, i.e., 15 years ago (source: Treasury Department).

14.   SOLDIERS - The US military has at least 10,000 troops today in each of 3 different countries – Afghanistan (14,000), Kuwait (13,000) and Qatar (13,000) (source: Washington Post). 

15.   SUPER GAME – Super Bowl # 54 will be held in Miami on 2/02/20.  No team in NFL history has ever played in the Super Bowl on their home field.  Next year’s game (2021) will be played in Tampa, FL (source: NFL). 

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This has been provided for information purposes only. Neither the information nor any opinion expressed constitutes investment advice and it is not intended as an endorsement of any specific asset-allocation style. Please note that any performance data is as of the date of publication unless otherwise noted. Past performance is not a guarantee of future results. Any sectors, industries, or securities discussed should not be perceived as investment recommendations. The views expressed represent the opinions of the author, Michael Higley and are not intended as a forecast or guarantee of future results. The information and opinions contained herein are current as of the date published and are subject to change without notice. Information has been obtained from sources believed to be reliable, but its accuracy, completeness, and interpretation are not guaranteed. See amgfunds.com for additional disclosures, our privacy policy and terms of use. Michael Higley is not affiliated with AMG Funds LLC nor any of its affiliates. Copyright © 2019 Michael A. Higley. All rights reserved. Email mick.higley@mahbtn.com for subscription information. Reproduction Prohibited without Express Permission.

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