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Current Trend Direction: Sideways to modestly higher

Current Price of FNMA 3.5% Bond: $102.03, Unchanged

Wall Street’s “fear index” jumped the most in about 5 months, halting the recent stock rally, after the President spooks the market with a controversial executive order aimed at tightening U.S. Immigration rules.

It’s a big week for economic reports starting with today’s mixed data from December Personal Income & Spending along with somewhat tame inflation data from the Fed’s favorite inflation gauge, the Core Personal Consumption Expenditures (PCE). The numbers had little impact on the markets.

The rest of the week Wall Street will see data on manufacturing, housing, and consumer confidence, and will culminates with the granddaddy of all reports, the monthly Jobs Report for January on Friday.

It’s also Fed week with the two-day Fed meeting kicking off tomorrow and ending on Wednesday at 2:00 p.m. ET with the release of the monetary policy statement. There is almost no chance of a hike to the short-term Fed Funds Rate at this Fed meeting. However, the statement could hint at future rate hikes in 2017, which is forecasted to see three hikes.

The release of the Fed statement could potentially be a market mover as is the monthly Jobs Report.

There are no scheduled Treasury Note or Bond auctions this week.

Technically, the Bond is just above support one (S1) at 101.94 with resistance one (R1) seen at the 50-day Moving Average of 102.29.  The 50-day has been a tough barrier to break above, as we have been saying for the some time now.  A look at the MMG Bond chart for the Fannie Mae 30-year coupon shows a downward slope for the 50-day with the price running below that level.

Enjoy today’s issue of By the Numbers, and use a few of these talking points with your clients and referral partners throughout the week.

1.     LAST EIGHT YEARS – The S&P 500 gained +216% (total return), an average annual gain of +15.5%.  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).

2.     FIRST QUARTER – Over the last 25 years (1992-2016), the S&P 500 has gained an average of +1.59% (total return) during the 1st quarter (January-February-March), a total that represents 17% of the index’s 25-year average annual return of +9.15%. 54% of the index’s overall gain has occurred during the 4th quarter (October-November-December) over the last 25 years (source: BTN Research).

3.     OIL – The price of oil closed at $45.23 a barrel on 11/29/16, the day before OPEC agreed to its first production cut in 8 years.  Now 2 months later, oil closed at $53.20 a barrel on Friday 1/27/17, up +18% (source: NYMEX).

4.     DOUBLE-DOUBLE – The national debt increased +37% during Bill Clinton’s 8 years as US president, reaching $5.7 trillion as of 1/20/01.  The national debt increased +86% during George W. Bush’s 8 years as US president, reaching $10.6 trillion as of 1/20/09.  The national debt increased +88% during Barack Obama’s 8 years as US president, reaching $19.9 trillion as of 1/20/17 (source: Treasury Department).

5.     THEY’RE CATCHING UP – China’s economy expanded by +6.7% in 2016, itssmallest growth rate in 26 years (since 1990).  The US economy grew by +1.6% in 2016.  The US economy has grown by at least +6.7% just twice in the last 60 years, i.e., +6.9% in 1959 and +7.3% in 1984 (source: Commerce Department).

6.     AMBITIOUS GOAL – On Monday 1/23/17 President Trump said that his administration will lead the effort to cut at least 75% of the business regulationsimposed by government agencies (source: White House).

7.     NOT AT THE CORPORATE LEVEL – Over 90% of American businesses are “pass-through” entities, i.e., the business income is reported on the business owner’sindividual income tax return.  “Pass-through” businesses include sole proprietorships, partnerships and S-Corporations (source: Tax Foundation).

8.     VARIED OPINIONS – 19% of Americans were not financially impacted by our nation’s 2008 recession.  Another 20% was negatively impacted by the downturn but have since fully recovered.  The remaining 61% have either “somewhat recovered” (41%), “have not yet begun to recover” (13%) or “may never recover” (7%).  4,200 Americans were surveyed in April 2016 for this report (source: Transamerica Center for Retirement Studies).

9.     OUTSIDERS – Just 5 of President Trump’s 15 Cabinet picks are politicians thatpreviously won an election – Jeff Sessions (Alabama senator), Sonny Perdue (former Georgia governor), Rick Perry (former Texas governor), Ryan Zinke (House member from Montana) and Tom Price (House member from Georgia) (source: BTN Research).

10.   THE FOUR LARGEST – 1 out of every 3 Americans (33%) lives in just 4 US states – California, Texas, Florida and New York.  These 4 states were home to 107.5 million citizens at the end of 2016 out of our nation’s population of 323.1 million(source: Census Bureau).

11.   TRADE WAR COMING? – 16% of US exports are sold to Mexico.  80% ofMexican exports are sold to the United States (source: Commerce Department).

12.   SMALL NUMBER, BIG DOLLARS – National health care expenditures in the United States during calendar year 2016 were an estimated $3.4 trillion.  Just 10% of Americans were the source of 65% of that total (source: Centers for Medicare and Medicaid Services, Kaiser Family Foundation).

13.   CHEAPER TODAY – The average price of gasoline nationwide was $2.29 a gallonas of Friday 1/27/17.  The average price of gasoline nationwide in 1967 (i.e., 50 years ago) was 33 cents.  After adjusting for 50 years of inflation, the 33 cent price in 1967 isequivalent to $2.42 in 2017 dollars (source: AAA, Department of Labor).

14.   SPENDING HABITS – Fiscal year 2017 spending for the US government is projected to be $4.015 trillion, split between $2.538 trillion of mandatory spending (e.g., Medicare, Medicaid and Social Security), $1.207 trillion in discretionary spending and $270 billion in net interest costs.  There are 12 different categories that comprise the $1.207 trillion of discretionary spending, the largest being the $592 billion allocated to “Defense” spending, i.e., 49% of discretionary spending (source: CBO).