After this past weekend, President Trump had to be very pleased. He jump started the stalled trade talks with China at the G-20 summit, and he was the first President to step foot in North Korea, at a meeting that restarted the nuclear negotiations with the isolated nation. The news about the trip was positive and the stock markets (already close to highs) rallied Monday and the S&P 500 hit a new high with upward momentum continuing through mid-week.
Yet the weekend had the feeling that we've all been here before, like entering a maze and wandering around for a while, only to discover you were right back where you started. Though the weekend provided great photo ops and renewed optimism for restarting negotiations around two thorny international issues, we are no further along to resolving them than we were months ago. And in the background, the Iranians admitted to breaking the terms of their accord for uranium enrichment, and just like that the weekend developments seem so-so. All three international issues are complex, have some very intractable components, and will take months, if not years, to resolve – if they are resolved. But we will continue to watch and comment on them for their impact on the markets and economy as we work our way through the maze.
On the lighter side and in honor of the Fourth of July, there are Americana articles and trivia sprinkled throughout this week's edition. Can you get all the trivia correct (without using Google!)? Answers are at the end – have fun and let me know how you do! There are also articles on social security, data showing the U.S. economy is decelerating (but still expanding), and a RSWA winning golf team! All this and more in this week's The Friday Buzz. Enjoy and have a very Happy Fourth of July weekend!
- International Tensions are Lower: Even if the meetings this past weekend in Asia did not move the needle on technical issues, anytime international tensions are reduced, it is welcomed. Despite the symbolic breakthroughs in North Korea, high hurdles remain, as they do with China. We will take good news when we can get it, and be glad the sides are talking and leaving the door open for progress.
- And… Tensions Rise with Iran: Due to sanctions, Iran is exporting approximately 250,000 barrels of oil per day, which is only 10%-15% of their capacity. The Iranian economy is heavily dependent on the revenue received from energy exports. The economic effects of the sanctions have been devestating as the economy has contracted 6% in the last two years. For context, during the Great Recession the U.S. economy contracted 4.2%. The Iranian leadership felt they had to take some action to quell (distract?) the restless populace, and so this week they played one of the only cards they have – nuclear threat (which is the aim of the program, not energy diversification). This week Iran admitted to surpassing the uranium enrichment limits set in the nuclear deal signed in 2015. And so the stakes, and tensions, rise in Persia.
Trivia Questions #1 - Easy: Who Wrote the Declaration of Independence? What year was the Louisiana Purchase? Who was the first mailman in Philadelphia? What was the date of the first moon landing?
- Four Score and Seven Years Ago…. Every year we host a Fourth of July party that has become a neighborhood institution. Displayed about our house are replicas of important U.S. documents like the Declaration of Independence, Constitution, and Bill of Rights. But my favorite is the Gettysburg address. Try reading it without getting goosebumps…
- Do Americans Optimize Social Security? At RSWA, we spend a lot of time working with clients on timing strategies to optimize Social Security benefits. But many retirees don't have guidance or full knowledge of rules and ramifications of claiming benefits early or later than their full retirement age. A study released this week concluded that most claim Social Security at the wrong time, costing them tens of thousands of dollars over their retirement, mostly due to taking it too early (see graph in this article). When to claim Social Security is both a financial and personal decision, but a full analysis should be performed to outlay all the options for a claimant.
Trivia Questions #2 – Moderate: Independence Day was first established as a holiday by Congress in what year? In what war, did the most U.S. citizens die and how many died? Who coined the phrase New England? What is the oldest city in the United States? On what holiday and in what year was the city of Portland, Maine incorporated?
- Manufacturing Slows a Little More & Q2 Earnings Are Upon Us: The June manufacturing index displayed slower growth, but was still showing an expanding manufacturing sector, but not by much. Earning announcements for second quarter will start next week. But S&P 500 companies have been warning of a poor second quarter with the highest number of companies issuing negative earnings per share guidance since 2016. Even if earnings for Q2 are negative, that is pretty much baked into the stock market cake. But investors will be looking toward guidance from company earnings calls and expectations for the rest of the year which will determine if stocks march higher or lower.
- Discovering a Copy of the Declaration of Independence: Living in such a historical area, from time to time, history comes alive with discoveries. Here is the story of how a copy of the Declaration of Independence was discovered in Exeter, NH in the 80's.
- Ultra-Wealthy Are Now Uber-Wealthy: Yet another article out this week that the wealthiest of Americans have benefited the most since the financial crisis versus everyone else. No wonder politicians are extolling tax breaks and student debt relief so more can participate from the long economic expansion. Also, many are attacking capitalism which made them so rich. But Warren Buffett still believes in capitalism, even if it is imperfect.
- First Hard Data in on Effects of New Tax Law: The IRS released the first report on the effects of the new tax law on tax refunds. The report did not comment on if taxpayers owed more or less than in previous years, but on the refunds themselves (According to The Tax Policy Center estimates, most filers will pay less in taxes with only a small percentage paying more – see the full report here – snore, Zzzzz). The bottom line is smaller returns for the wealthy, more filers used the standard deduction, and the AMT almost disappeared for those making less than $1M.
Trivia Questions #3 – Hard: Who was the first President of the United States in Congress Assembled under the Articles of Confederation (trick question? 😊)? What holiday did the colony of Massachusetts ban in 1659 which lasted a generation? What does the red, white and blue symbolize in the U.S. flag? We all know that on the stars on the American flag represent the states and the stripes represent the 13 original colonies. But what is the symbolism behind using stars and stripes?
- RSWA Sponsored a YMCA Golf Event: RSWA was a corporate sponsor for the Exeter NH Southern District YMCA golf event on June 21st. The weather was a little spotty but everyone enjoyed themselves while supporting a great cause. RSWA had two foursomes playing and the team of Jessica Kreger, Diane Lewis, Bob Trahan and Bill Catania won the event! Here is a picture of the happy winning team!
Answers to trivia:
Trivia Questions #1 – Thomas Jefferson; 1803; Benjamin Franklin; July 20, 1969
Trivia Questions #2 – 1870; Civil War – approximately 655,000; John Smith coined the word New England; St. Augustine, Florida; Though settled much earlier, the city of Portland, Maine did not incorporate until July 4th, 1876;
Trivia Questions #3 – John Hanson; Christmas (those Puritans also made it illegal to bathe without a doctor's note in 1845!); ; Flag symbolism: Red – hardiness & valor; white – purity & innocence; blue – vigilance, perseverance & justice. Stars are a symbol of the heavens and the divine goal to which man aspires and the stripes are symbolic of the rays of light emanating from the sun (Source).
I hope you enjoyed the trivia and Americana articles, please forward to anyone who would enjoy them. Have a wonderful Fourth of July weekend!