Weekly Market Commentary May 6, 2019

Fast Facts

Good Samaritan– Robert King was driving home from his job at a car dealership in the Chicago suburbs when he spotted an emergency medical van crashed on the roadside. King stopped to see if he could help, and a man asked if he could drive him and several boxes to Northwestern Memorial Hospital. The man hopped in the car and told King that the boxes held a liver, a kidney, and a pancreas from a just deceased donor that were being rushed to two transplant patients. The organs arrived at the hospital in time, giving the two patients a shot at life. “I’m just glad I was able to do a good deed,” King said.

High-Ho, High- Ho, it’s Back to Jail You Go– An Austrian fugitive turned himself in after 10 years on the lam in Spain’s Canary Islands because he’d gotten fed up with living in a tropical paradise. Police confirmed the ex-jailbird, 64, had escaped from prison and settled on the island of Tenerife. He presented himself to cops at Salzburg’s train station carrying two suitcases. He said he had returned, police said, because “Tenerife is not as nice as it used to be and he had lived there long enough.” He was taken to a Salzburg jail.

It’s a Bird! It’s a Plane! It’s the Fed!- “What do the Avengers, Wonder Woman, and the Federal Reserve have in common?” asked Jeff Sommer in The New York Times. Comics. Yes, that’s right: The central bank has been publishing a comic-book series titled The Story of Monetary Policy since the 1950s. It might sound like a snooze, but its creators include the New Yorker cartoonist Paul Noth. The latest issue, published last week, “shows the problems caused when money is spent, hoarded, and squandered.” In one scene, alien economists land on a distant planet where a recession is underway. “What is needed is ‘expansionary monetary policy,’” says one of the characters. The Fed tries not to act like a superhero; it simply hopes to dispense some timely financial wisdom. “Don’t expect spinoffs on TV,” however: The comics are not sold commercially and are distributed free to teachers.


Weekly Focus – Think About It

“Joy, feeling one’s own value, being appreciated and loved by others, feeling useful and capable of production are all factors of enormous value for the human soul.”
-Maria Montessori, Italian physician and educator


The Markets

The Standard & Poor’s 500 Index is off to its best start in 20 years.

Despite the exceptional performance of U.S. stock markets year-to-date, and data that suggest economic growth remains steady, some analysts and investors have been pecking at Federal Reserve Chair Jerome Powell. They’re keen for the Fed to implement a rate cut, which could stimulate economic growth and help push stock markets higher, because inflation is lower than ideal, reported Howard Schneider and Ann Saphir of Reuters.

Recent data suggest core inflation is at 1.6 percent. That’s below the Fed’s target rate of 2 percent. Fed leaders have said they think low inflation may be temporary. Until a trend has been established to their satisfaction, they intend to do nothing. The Reuters article explained, “…preemptive…rate moves in either direction appear off the table for now, absent some unexpected event that raises new risks or shocks the economy into a higher or lower gear.”

Second-guessing the Fed is not new. In 1955, the ninth Chairman of the Federal Reserve, William McChesney Martin, offered this insight to the Fed’s work:

“Those who have the task of making [credit and monetary] policy don’t expect you to applaud. The Federal Reserve…is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.”

On Friday, jobs data suggested U.S. economic growth continues apace. The Bureau of Labor Statistics report showed unemployment was at a 49-year low. The news made investors happy, and the Nasdaq Composite and S&P 500 finished the week higher.

Overlooked economic indicators. Last week, the Federal Reserve Open Market Committee statement indicated inflation was below target levels. The report stated, “On a 12-month basis, overall inflation and inflation for items other than food and energy have declined and are running below 2 percent.”

A less respected economic indicator is telling a similar story about inflation. The Tooth Fairy Index confirms the value of a baby tooth isn’t what it used to be. For the second consecutive year, the average monetary gift left behind by the Tooth Fairy was less generous. In 2018, it fell 43 cents to $3.70, on average.

There are regional differences. West Coast Tooth Fairies are, typically, more generous than Midwest tooth fairies. The regional numbers for 2018 looked like this:

  • $4.19 was the average payout on the West Coast. That’s down 66 cents from $4.85 in 2017.
  • $3.91 was the average payout in the South. That’s down 21 cents from $4.12 in 2017.
  • $3.75 was the average payout in the Northeast. That’s down 60 cents from $4.35 in 2017.
  • $2.97 was the average payout in the Midwest. That’s down 47 cents from $3.44 in 2017.

The first baby tooth lost continues to command a higher value than other teeth. It was worth $4.96, on average, across the country.

The non-monetary benefits of impending Tooth Fairy visits can be significant. They may include: 1) early bedtime in anticipation of the visit; 2) joy when compensated for a lost tooth; 3) a chance to discuss the importance of oral hygiene; and 4) the opportunity to teach kids about saving.


Best regards,

John Klevens, CFP


Sources: The Week Magazine, NewYorkTimes.com
Portions of this newsletter has been prepared by Peak Advisor