August 2017
Market Update
(all values as of 09.30.2020)

Stock Indices:

Dow Jones 27,781
S&P 500 3,363
Nasdaq 11,167

Bond Sector Yields:

2 Yr Treasury 0.13%
10 Yr Treasury 0.69%
10 Yr Municipal 0.84%
High Yield 5.77%

YTD Market Returns:

Dow Jones -2.65%
S&P 500 4.09%
Nasdaq 24.46%
MSCI-EAFE -8.92%
MSCI-Europe -10.53%
MSCI-Pacific -6.19%
MSCI-Emg Mkt -2.93%
 
US Agg Bond 6.79%
US Corp Bond 6.64%
US Gov’t Bond 8.04%

Commodity Prices:

Gold 1,892
Silver 23.37
Oil (WTI) 39.88

Currencies:

Dollar / Euro 1.17
Dollar / Pound 1.28
Yen / Dollar 105.60
Dollar / Canadian 0.74

IMF Agrees With Trump On Dollar Valuation – Currency Overview

The International Monetary Fund (IMF) releases a report each year detailing its assessment of monetary policies globally and identifying imbalances affecting global growth. Discrepancies as to how currencies are valued has been a focal point for President Trump, as various countries have been tagged as currency manipulators by the administration. The IMF has concurred with such complaints and has drafted policies to strictly enforce currency valuation policies. China, Germany, and Japan have been accused by the administration of devaluing their currencies in order to boost their exports at the disadvantage of U.S. companies.

The most significant misalignments have been found in emerging market currencies whose countries benefit when their currencies devalue, making their exports more competitive worldwide. In line with President Trump’s suggestion that the U.S. dollar is overvalued, the IMF estimates that the dollar is 15% overvalued relative to other currencies, meaning that U.S. products are less competitive globally. Saudi Arabia’s currency is also estimated to be overvalued by 20%, partly because it is pegged to the U.S. dollar.South Korea, Singapore, and Mexico currently have the most undervalued currencies, giving them a direct trade advantage over other countries. (Source: IMF External Sector Report 2017)

U.S. Beef Exports To Japan Get Hit With Higher Tax – Trade Policy Update

The single largest purchaser of U.S. beef, Japan, announced in July that it would impose a temporary 50% tariff on frozen beef coming from the United States and several other countries. The imposed 50% tariff would be an increase from the current 38.5% tariff on beef imports into the country. Japan accounted for nearly 24% of all U.S. beef exports in 2016. In response, the U.S. agricultural secretary noted that the higher tariff would likely reduce American beef exports in addition to boosting the U.S. trade deficit with Japan.

As discreet as it may seem to many, a tariff increase to 50% from 38.5%, based on 2016 export figures, amounts to a $755 million tax on beef exports to Japan. Such tariffs can stifle demand in Japan and hinder beef producers in the U.S. The Trump Administration has been quite vocal about foreign trade practices deemed unfair by the United States.

Source: U.S. Meat Export Federation

 

 
The IMF Estimates That The U.S. Dollar Is 15% Overvalued

Fed Says It Is Ready To Sell Its Bonds – Fixed Income Overview

Global bond yields rose on the expectation that central banks around the world have agreed to start removing accommodative measures. The yield on Germany’s 10-year government bund (bond) has risen from a negative yield last year to 0.58% in mid-July.

The U.S. corporate bond market continues to provide funding for the mega merger deals in the equity markets. The issuance of such corporate debt at low rates is supported by the unparalleled demand for U.S. dollar denominated debt. Even at ultra low rates, institutional buyers such as pension plans and mutual funds have an ongoing voracious appetite for fixed income assets that offer consistent income and return of principal.

As the Fed prepares to start unloading portions of its massive $4.4 trillion inventory of government bonds, traders are eager to see how well markets will absorb the extra supply and what disruptions might occur. (Sources: IMF, Federal Reserve, Bloomberg)

More Americans Working Past 70 – Demographics

Workers who were either poor savers or who perhaps experienced a dramatic life crisis are finding themselves short on funds in their retirement years. Some workers who did plan accordingly, didn’t plan to live as long and be as healthy as they are, thus creating revisions to retirement plans late in their careers. As health and medical science have advanced over the past few decades, so has the lifespan of American workers.

Many Americans that retired with the notion that Social Security would suffice in their elder years, came to the realization that Social Security benefits alone weren’t enough. A part-time job and even full-time menial jobs at minimum wage levels have become supplemental income for many retired Social Security recipients.

Almost 19% of people 65 and older were working at least part-time in the second quarter of 2017, the highest in 55 years. The share of older people in the workforce is higher than any point since before the creation of Medicare.

Baby boomers are increasingly ignoring the traditional retirement age of 65, with 32% of Americans age 65 to 69 still employed. The Bureau of Labor Statistics also found that a growing number of seniors are unable to retire even past 70 years of age. The most recent data shows that 19% of 70 to74-year olds were still working, up from 11% in 1994.

The irony of the data released shows that seniors who find it easier to continue working are the ones that are healthy, well educated, and highly skilled, tend to be the ones that are least likely to need the money. (Sources: Bureau of Labor Statistics, Social Security Administration)