Stock Indices Move Higher In October – Global Equity Review

It has been a great couple of months for most all of the market.  The S&P 500 Index and the Nasdaq Index both closed at record levels as of November 1st. Developed and emerging market indices propelled higher in October buoyed by a continued low rate environment and a weaker dollar.

Volatility, as measured by the Chicago Board Options Exchange (CBOE) Volatility Index, or ‘the fear index,’ fell to a near annual low in October, as subdued risk concerns dominated.

The technology and health care sectors were the top performing large cap sectors in October, with energy as the worst performing sector in the S&P 500 Index. Market analysts are seeing a shift or rotation towards value from growth, reminiscent of a more cautionary environment. (Sources: S&P, CBOE, Bloomberg)

Bond Yields Stabilize – and the Yield Curve looks normal again!

The Federal Reserve cut interest rates for the third time this year but signaled that it would not cut them further unless economic growth slowed amid concerns.  This has allowed the yield curve to return to a condition where rates increase over time.  For economics based advisors like myself, an inverted yield curve can be a major indicator of trouble.

Yields on government and corporate bonds remained stable in October as expectations of economic growth and a pause to further rate cuts stabilized bond markets. Bond prices have risen since the beginning of the year, with government and corporate bond yields still hovering near record low levels. Bond prices move in the opposite direction to yields.(Sources: Federal Reserve, U.S. Treasury)

What Prices Have Changed The Most

Price changes on certain products tend to affect a larger portion of the population more so than other products. Over the past year, the cost of health insurance has climbed over 18%, affecting nearly everyone paying for health coverage. However, the increase in baby food of 5.8% over the same period is limited to younger families across the country.

Televisions, dresses, and eggs saw formidable price drops over the past year, affecting a more concentrated group of consumers.

Source: Bureau of Labor Statistics

Social Security Payments Increasing By 1.6% For 2020 – Retirement Planning

Social Security recipients are due to receive a modest increase in benefit payments payable in 2020. But for many recipients, the increase in payments will go towards higher Medicare costs. The increase will affect over 63 million Americans receiving Social Security benefit payments.

The Social Security Administration announced a 1.6% increase in benefit payments effective in late December 2019 for disability beneficiaries and in January 2020 for retired beneficiaries. The 1.6% increase is slightly less than the increase of 2.8% for 2019.

Many are concerned that the 1.6% increase may not cover expenses that are rising at a faster rate, including other essential items such as food and housing.

Over the years, recipients have received varying increases depending on the inflation rate. With low current inflation levels, increases in benefit payments have been subdued relative to years with higher inflation.

Unfortunately, Social Security is a major source of income for many of the elderly, where nine out of ten retirees 65 years of age and older receive benefit payments representing an average of 41% of their income. Over the years, Social Security benefits have come under more pressure due to the fact that retirees are living longer. In 1940, the life expectancy of a 65-year old was 14 years, today it’s about 20 years.

By 2036, there will be almost twice as many older Americans eligible for benefits as today, from 41.9 million to 78.1 million. There are currently 2.9 workers for each Social Security beneficiary, by 2036 there will be 2.1 workers for every beneficiary.  I sure hope they make a ton of money because we might need their help!

Source: Social Security Administration, https://www.ssa.gov/news/cola/