May 2018

65 Year Olds Projected To Exceed 18 Year Olds – Demographics

Demographics and population data are carefully tracked by the Census Bureau in order to better determine what the United States may look like in the future.

Over 73 million minors, under 18 years of age, currently out number 49 million older Americans, 65 and over. Younger citizens help spur economic growth and provide essential workers for the labor market. The demographical make-up of the country has been driven by the baby boom generation for decades. Those born between 1946 – 1964 have shaped the economic status of our country while providing economic growth and vitally skilled workers. The first wave of baby boomers reached 65 years of age in 2011, starting a massive shift of individuals from working status to retirement status.

The Census Bureau estimates that by 2035, those age 65 and older will begin to out number 18 and under. The number of 65 year olds and older will rise much faster than those 18 and younger creating a strain on the U.S. job market and economy. The shrinking pool of minors will eventually lead to lower population growth thus creating a drag on economic growth. A growing elderly population is expected to impact already strained Medicare and Social Security benefits. (Source: U.S. Census Bureau)

Lumber Supplies Pose Challenge For Housing – Housing Update

The fierce storms that ravaged Texas and Florida last year, in addition to the horrendous fires in Northern California, have led to a rise in demand for construction materials including lumber. Homebuilders use a multitude of raw and finished materials for the construction of homes, including wiring, plastic tubing, and lumber. The increase in demand has decreased the supply forcing prices higher. Builders are passing along the higher costs to home buyers thus pushing housing prices upward. In addition to the lack of supply contributing to rising prices, a recent imposition of tariffs on Canadian timber is also adding pressure. Less expensive Canadian lumber has been a primary source for builders. Suppliers to homebuilders are essentially running low on levels of lumber all over the country, as lumber prices are on the rise with homebuilders also gearing up for the summer season. Various other factors are also affecting lumber prices nationwide, such as thousands of new homes under construction, and young families eager to purchase a new home before rising rates dampen their chances.(Source: Commerce Department)

10-year Treasury bond yield reached 3%, a psychological level for the bond market

Stocks Enter A Trading Range – Equity Markets Update

Markets rebounded in April as fundamental factors drove prices higher. Among the factors influencing the markets were global expansion, positive domestic activity, increasing earnings, and capital spending increases.

Stocks traded sideways, with the S&P 500 temporarily trading below its 200-day moving average in early April and then bouncing back toward the middle of its recent trading range. This technical narrative is essentially positive, meaning that the market bounced from a low upward towards possible new highs.

Market watchers have termed the drop in equity prices in early February as a “shock drop”, resembling reactions driven by human behavioral activity. Since the initial down turn in February, there have been several intermediate-term downturns, alluding to fundamental weaknesses that have not materialized.

Correlations among various equity sectors has diminished as specific industries and companies are sought after rather than the broad indices. Analysts refer to this as a “stock picker’s market”.

Analysts raised their 2018 forecasts for revenue growth for S&P 500 companies to 7.2%, up from 5.4% in 2017. Financial and industrial stocks historically have seen earnings improvements during rising inflation and rising rate environments.

Sources: S&P, Bloomberg, Reuter

10 Year Treasury Bond Hits 3% – Fixed Income Overview

The 10-year Treasury bond yield reached 3%, a psychological level for the bond market. Breaching the 3% mark is expected to pose lending constraints for businesses and consumers as loan costs rise.

The drop in bond prices has placed bonds as a more attractive option for income seeking investors since bonds are favored during periods of market volatility due to traditionally experiencing less volatility than stocks.

Short-term rates and long-term rates are coming closer together, known as a flattening yield curve. Short-term rates are rising faster, which are highly influenced by the Federal Reserve’s rate increases. Long-term rates are established by the market as well as the expectation of economic growth and inflation.

The issuance of corporate debt by companies is increasing before rising rates heighten the cost to borrow above current levels. A demand for fixed income globally continues to fuel the issuance of new bond issues as well. Consumers and homeowners with loans tied to rising short-term rates, such as the Libor and Fed Funds rates, are expected to feel the effects of rising rates the most.

Sources: Bloomberg, U.S. Treasury, Federal Reserve

the personal savings rate increased to 3.1% of disposable income as of March

Personal Savings Rate Indicates Consumer Sentiment – Consumer Behavior

Federal Reserve data show that the average consumer checking account balance, a measure of consumer personal savings, has increased in 23 of the past 30 quarters. Recent data from December 2017 through March 2018, illustrates an increase in the savings rate to 3.1% of disposable personal income as of March 2018. Economists view this increase as a possible pause in economic growth until consumers feel more confident about spending.

Historically, Americans tend to save more as economic times become more difficult, and tend to spend during prosperous periods. Past slow downs such as in the mid 1970s and the early 1980s saw an increase in the savings rate, a barometer of consumer sentiment. The expansion during the mid-to-late 1990s saw a gradual drop in savings, as consumers spent more confidently as their incomes rose.


What Could Cost More In Retirement – Retirement Planning

As retirement nears for millions of aging baby boomers, the realization of how to pay for retirement becomes a challenge for many.

Expenses that one was accustomed to while still working and raising a family changes dramatically once retirement arrives. The biggest challenge for many is how to maintain the same lifestyle in retirement as during working years.

Unfortunately, many have realized that Social Security and menial retirement savings just aren’t enough to make up for lost wages. This either forces many retirees to seek part-time employment or merely live a less desirable lifestyle in order to minimize expenses.

Unforeseen expenses such as an illness not covered by Medicare or health insurance, home repairs, and emergency cash outlays may deplete valuable cash savings and derail what was thought to be a well executed financial plan. Retirees have found that liquidity during retirement is critical, thus avoiding the necessity to sell investments at gains or losses and even reducing income derived from them.

The biggest surprise that retirees are having is the increasing costs of drugs and healthcare. The Employment Benefit Research Institute has identified a number of expenses not necessarily planned for that are common among retirees: Special diets with foods and ingredients that may be more expensive than average, medical & toiletry items such as supplements and diapers, special transportation, medicare part A & B items not covered.

Sources: Employment Benefit Research, Social Security Adm.,

over 1 million trucking companies cover over 164,000 U.S. highway miles

Trucks Delivering More – Economic Dynamics

A critical component of the economy proving fluid movement between companies and consumers are logistics and shipping services provided by the trucking industry. Trucks provide some of the most ample delivery logistics in the country, delivering packages and goods from Alaska to Florida spanning over 164,000 miles of highways nationwide.

There are over 1 million trucking companies spanning the country, from California and Hawaii to Alaska and Florida, transporting everything imaginable from food and milk to gasoline, cars and mail.

As a vital component of the labor market, the trucking industry employs roughly 7.3 million people, with 3.5 million of them as truck drivers. Economic growth also creates more shipping activity throughout the country, as companies ship products to other businesses and consumers. The Federal Reserve carefully tracks the amount of cargo shipped by trucks, viewed as a gauge of economic activity throughout the nation. Data is compiled as the Truck Tonnage Index, representing all shipments via trucks in the country. The index has been steadily increasing over the past 18 months, reaching a high of 149.3 in January 2018. (Sources:, Dept. of Transportation, Federal Reserve)

Gasoline Prices Heading Higher This Summer – Commodities Update

Crude oil prices have been trending higher over the past few months, resulting in higher gasoline prices. Geopolitical events have prompted supply disruptions in regions of the globe that have jolted energy markets. The anticipation of rising demand during the approaching summer months has also levied additional stress on the markets both domestically and internationally. The average cost for a gallon of regular grade gasoline nationwide as of April 30th was $2.84, already above the EIAs summer estimate of $2.74 per gallon.

Sporadic and infrequent occurrences, such as a major storm, can reduce gasoline supplies in parts of the country leading to short-term price “spikes.” Labor strikes and shortages may also cause production reductions and supply issues. (Source: U.S. Energy Information Administration)