- FROM THE HIGH POINT – In the 91 trading days since closing at an all-time high on 1/03/2022, the S&P 500 has fallen 15.7% (total return) through last Friday 5/13/2022. 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).
- DO THE MATH – The S&P 500 is a cap-weighted index, i.e., the largest capitalized stocks carry a disproportionate impact on the index’s performance calculation. As of the close of trading on Friday 5/13/2022, the 43 largest stocks in the index carries the same weight as the other 462 stocks in the index. Note there are 505 stocks in the S&P 500 because 5 different stocks each have 2 share classes (source: S&P).
- STOCKS – From 12/31/2019 to 12/31/2021, the value of all US individual stocks increased by $19.5 trillion (+57%) to $53.4 trillion, before falling $5.1 trillion (10%) in the 1Q 2022 to $48.3 trillion (source: Siblis Research).
- THE INDEX TO FOLLOW – As of 3/31/2022, the S&P 500 index represented 83% ($40.3 trillion) of the market capitalization of the entire US stock market ($48.3 trillion) (source: S&P).
- HOW MUCH? – Fed Chairman Jerome Powell foreshadowed on 5/04/2022 the prospect of rate increases at each of the remaining 5 Fed meetings in 2022, including 0.50 percentage point increases at the next 2 meetings (scheduled for June and July). Powell’s comments equate to 2.5 percentage point increases in 2022, matching the 2.5 percentage point rate hikes implemented by the Fed in 1994 or 28 years ago (source: Federal Reserve).
- WHY THEY ACTED – The 1994 Fed rate hikes (6 rate hikes totaling 2.5 percentage points) were implemented because the Fed was concerned about a strengthening economy and an uptick in domestic inflation. Inflation (as measured by the Consumer Price Index) was only +2.7% in 1993, +2.7% in 1994 and +2.5% in 1995 (source: Commerce Department).
- WHAT TO DO? – 63% of 1,018 American adults surveyed in April 2022 reported “very worried” or “moderately worried” about having enough money accumulated for retirement (source: Gallup).
- CHANGE IN DEBT – From 12/31/2019 (pre-pandemic) to 3/31/2022, mortgage debt in the US has increased +17% (to $11.18 trillion), auto loan debt has increased +10% to $1.47 trillion, credit card debt has declined 9% to $840 billion and student loan debt has increased +5% to $1.59 trillion (source: Federal Reserve Bank of NY).
- CAMPAIGN PROMISE – President Joe Biden is considering eliminating up to $10,000 of student loan debt per borrower, action that may be done through an executive order issued by him. This would cost US taxpayers an estimated $377 billion, wiping out 24% of the $1.59 trillion of total student loan debt and would eliminate completely the student loan debt held by approximately 33% of all borrowers (source: White House).
- RECORD HIGH – Tax receipts collected by the US in April 2022 were $863.6 billion, creating a monthly surplus of $308.2 billion, both numbers representing all-time monthly records for the US (source: Treasury Department).
- WAITING – The median age of American women giving birth was 30 in 2019 (the latest year that data has been released), the oldest age in US history and a number up from age 27 in 1990 (source: Census Bureau).
- YOU SNOOZE, YOU LOSE – A buyer of an average-priced existing US home ($266,300) in January 2020 (at the beginning of the global pandemic) who put 10% down would have a $1,078 monthly principal and interest payment on a 3.51% national average 30-year fixed rate mortgage. A buyer of an average-priced existing US home ($375,300) in March 2022 who put 10% down would have a $1,746 monthly principal and interest payment on a 4.67% national average 30-year fixed rate mortgage (source: Freddie Mac).
- CARPENTERS NEEDED – 3.78 million new single-family homes began construction in the US in the back-to-back months of December 2021 and January 2022, the highest number of new residential construction starts in back-to-back months since 3.90 million single-family homes were started in April and May 2006 (source: Census Bureau).
- THE PLACES TO BUY – The 3 most affordable housing markets in the United States today are Pittsburgh, Oklahoma City and Rochester, NY (source: Frontier Centre for Public Policy).
- HARD TO BELIEVE – In just his 6th race in his life, “Rich Strike” won the Kentucky Derby on 5/07/2022 as an 80-1 longshot. The 3-year old, purchased for just $30,000 in September 2021, paid $163.60 on a $2 bet to win. “Rich Strike,” in 17th place out of 20 horses halfway through the race, collected a purse payout of $1.86 million for the win. IRS Publication 505 discusses tax implications of gambling winnings (source: Sports Illustrated).
June 22, 2022 in Market Housing and Educational Updates
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