January 22, 2008
January 22, 2008
When the S&P 500 fell to 1407 on the Monday after last Thanksgiving, the stock index was down 10.1% from its October all-time high of 1565. It was also the first time the S&P 500 had fallen at least 10% from a previous high in more than 4 ½ years. That historical perspective makes what has happened in the first 13 trading days of 2008 (i.e., through last Friday) all the more disappointing. The index’s drop of 9.8% YTD was initially driven by fears of a possible recession but the decline has been accelerated by the fear and panic of frustrated investors (source: BTN Research).
The $150 billion economic-stimulus package proposed by the White House last week may include tax rebates of $1,600 for a couple. The plan is similar in structure (but larger) than the 2001 plan implemented during President Bush’s first year in office that was designed to limit the negative impact of a recession (source: White House).
Wall Street and Main Street has had a 3-day weekend to reevaluate the stock market’s difficult beginning to 2008 before trading resumes today. Investors look forward to the day when their dominant concern is to worry about the potential return on their money rather than worrying about the return of their money.
Notable Numbers for the Week:
1. THE BIG 10 – The 10 largest capitalized stocks in the S&P 500 represented 20% of the index’s $13 trillion market value as of the end of last year, i.e., just 2% of the stocks in the index are worth 20% of the index’s total market value (source: S&P).
1. WAY TOO SIMILAR – In the 6 months before the last official recession in the USA (which occurred in 2001), the unemployment rate rose +0.4% and the number of idled workers increased by +611,000. In the last 6 months, the nation’s unemployment rate has risen +0.5% and the number of unemployed Americans have increased by +722,000 (source: Department of Labor).
2. THE COST OF WELLNESS – The average cost of 1-night in a semiprivate room in a Midwestern hospital (not counting doctor’s services) has soared from $809 in 1987 to $5,504 in 2007, an increase of +10.1% per year over the 2 decades. Inflation in the USA, as computed by the CPI, has increased by +3.0% per year over the same 20 years. The consumer price index (CPI) is a measure of inflation compiled by the US Bureau of Labor Studies (source: Medical Mutual of Ohio, Wall Street Journal, and Department of Labor).
3. CLEAN UP YOUR ACT – Moody’s issued a warning on 1/10/08 to the United States regarding their Aaa-rating on government-issued bonds. US debt, which has carried the top credit rating from Moody’s since 1917, was warned to cut back on Medicare, Medicaid and Social Security expenses over the next 10 years. Those 3 programs will consume 42% of all government spending in the current fiscal year (source: Financial Times, White House).
Securities and Investments Advisory Services offered through NFP Securities, Inc. a Broker/Dealer, Member FINRA/SIPC and Federally Registered Investment Advisor. Partners Wealth Management is an affiliate of National Financial Partners Corp., the parent company of NFP Securities, Inc
This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed by NFP Securities, Inc. as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. The indices mentioned are unmanaged and cannot be directly invested into. Past performance does not guarantee future results.
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