I am not a fan of basketball, but one story this year caught my attention. The Philadelphia 76ers, who were far and away the worst team in the National Basketball Association over the past few seasons, surprised many fans and basketball insiders alike when they won 52 games en route to the number 3 seed in the Eastern Conference playoffs. For the 76ers players and fans, the mantra “trust the process” served as a rallying cry for the team throughout the season and into the playoffs.
Inflation has been a popular topic of late.
In his press conference to announce the Fed’s decision to cut interest rates following its July meeting, Fed Chair Powell cited “muted inflation pressures” as justification for action.
However, retaliatory tariffs between the U.S. and China have raised concerns this could spark inflationary pressures as consumers are forced to pay higher prices.
When Congress passed the Federal Reserve Act in 1913, it established the Federal Reserve System with the initial objective of supporting a fragile banking system. In the over 100 years since it was first established, the responsibilities of the Federal Reserve System (or the Fed for short) have expanded to include several broader responsibilities, such as fostering a sound banking system and a healthy economy. One thing that hasn’t changed is the Fed is an independent government agency that is accountable to the public and Congress to act as the Central Bank of the United States.
The Free Application for Federal Student Aid (FAFSA) collects demographic, income, and asset information from student applicants and their families. This information is used to calculate a student’s eligibility to receive any financial aid for college expenses based on the Expected Family Contribution (EFC). The EFC is calculated according to a formula that is established by the federal government and is a measure of a family’s financial strength. Schools consider the EFC as one of several factors to determine the amount, if any, a student may be awarded for that school year. Simply put, students are eligible to receive need-based student aid if the sum of their EFC and other estimated financial assistance is less than the total cost of attendance.
I am always hesitant when writing about large market drops. It’s a delicate line to walk. In writing something that will calm your nerves and add perspective to what’s happening in the markets, am I calling attention to something that you may not have been aware of? Now that a few days have passed and the markets have rebounded a little, I think it’s safe to address the events that unfolded last week.
Earlier this month, President Trump announced the United States will impose a new 10% tariff on $300 billion worth of goods imported from China. The new tariffs, which are set to take effect on September 1st, could have a more direct impact on U.S. consumers because the list of target goods include clothes, toys, cell phones, electronics, and other retail items. Up until this point, tariffs levied by the U.S. against Chinese imports have targeted goods that are used mainly as inputs in the manufacturing process, such as steel and aluminum. Those tariffs affected the costs for U.S. companies, but those increases were not necessarily passed through to the consumer. These newest tariffs could hurt consumer’s wallets.
In a widely anticipated, yet highly debated, move, the Federal Reserve (Fed) announced this past Wednesday it is cutting interest rates. The Fed lowered the federal funds target rate range by 0.25%, from 2.25%-2.50% to 2.25%-2.00%. This marks the first time the Fed has cut interest rates since 2008. So, why was the Fed’s decision so controversial?
With the fall semester fast approaching, there are many last-minute decisions and preparations being made for the next wave of freshman students. However, one decision that may have fallen to the wayside is health insurance for the incoming student. An important question to ask is “will my child be covered under my medical insurance once they go off to college?”
It’s often said there are two things that are guaranteed in life: death and taxes. While there have been many who have expanded this list to include other certainties life has to offer, one that often doesn’t make the list is recessions. As much as we hope and plead that economic expansions will last forever, we know the inevitable truth. The economy is cyclical. It goes through periods of expansion and contraction. Recessions happen as a result.
Markets had a great first half of the year. Major stock indexes, including the S&P 500, reached new highs. However, global economic growth is slowing. Investor concerns about a recession have increased and unresolved trade negotiations with China have created even more uncertainty. Slowing economic growth, rising recession risk, and tariff uncertainty doesn’t sound like a recipe for a stock and bond rally, does it? So, what has spurred stocks and bonds higher?
Things can change quickly. If I was writing this post one month ago, it would be a completely different topic with a much different tone.
Following four straight months of positive performance to start the year, the S&P 500 posted a -6.35% return in May. This was the third time in eight months the S&P 500 had a monthly loss of more than 6%. Fears of a full-blown trade war were reemerging as trade negotiations with China soured and it looked like fresh tariffs would be imposed against Mexico. The trade wars would put downward pressure on an already slowing global economy, putting even more pressure on central banks to ease monetary policy.
Everyone, young and old alike, can be a target for fraud. In 2018, the Federal Trade Commission collected 1.4 million fraud reports. People reported losing a whopping $1.48 billion to fraud in 2018, which is an increase of 38% from 2017. Of people that included their age in reports, those aged 20-29 reported the loss of money in 43% of reports compared to 15% for those aged 70-79. However, the loss amount reported was nearly twice as high for ages 70-79.
It’s not every day a “Jeopardy!” contestant becomes a household name and makes one of the longest running television game shows must watch TV. But that’s exactly what happened during James Holzhauer’s 32-game winning streak. Throughout Holzhauer’s dominant run, it seemed to be only a matter of time before he became the highest-winning contestant in “Jeopardy!” history, a record held by Ken Jennings. Jennings amassed a total of $2,520,700 over his 74-game winning streak in 2004. However, Holzhauer was defeated in his 33rd game, coming just $58,484 shy of Jennings’ record.
As we highlighted in our post “Anatomy of the U.S. Economy,” consumer spending accounts for nearly 70% of U.S. gross domestic product (GDP). Current consumer spending, as well as future spending, is highly influenced by consumer expectations for the economy.
The U.S. economy is on the verge of breaking the record for the longest stretch of economic expansion in U.S. history. Since the U.S. economy hit bottom in June 2009 following the Great Recession, it has been on a slow and steady recovery that has it on the brink of surpassing the expansion from March 1991 to March 2001 as the longest in U.S. history.
The American Dream consists of baseball, warm apple pies, and homeownership. As I near the end of my mid-twenties, many of my peers are trying to realize the American Dream of purchasing their perfect starter home. Over the years, my cohorts have casually been looking to find the deal of the century in a move-in-ready starter home at a low price. But even the starter homes that require major renovations and improvements have come with lofty price tags.
For the past 18 months, two hot button issues for investors have been the Fed and trade negotiations between the U.S. and China. These two issues were the catalysts for two market corrections in 2018, the latter of which nearly approached bear market territory. However, for the first five months of this year fears of a Fed misstep were alleviated and reported positive progress towards a trade deal between the U.S. and China spurred markets to new all-time highs.
On Friday, Uber went public in the what is the biggest initial public offering (IPO) so far this year. Earlier this month, Beyond Meat went public with less hype and saw its price skyrocket 163% in its first trading day, making it the best-performing first-day IPO in nearly two-decades. Beyond Meat is a producer of plant-based meat substitutes founded in 2009. The company’s Beyond Burger is sold at Whole Foods and restaurants chains around the country.
At HIGHLAND, one of the cornerstones of our investment approach is that securities offering higher expected returns share particular attributes, which we refer to as the dimensions of higher expected returns (or dimensions for short). These dimensions are based on economic theory, backed by Nobel Prize winning academic research, and supported by decades of real-world historical data. Dimensional Fund Advisors is an investment management firm with a long history of applying academic research to practical investing and is one of our preferred investment managers. Dimensional Fund Advisors defines a dimension as a return difference between two assets or portfolios “that is sensible, empirically robust in the data, and cost-effective to capture in well-diversified portfolios.”
