Political Calculations
Unexpectedly Intriguing!
September 19, 2017

The pace of dividend cuts in 2017-Q3 has decelerated from what we were observing a month ago, where suddenly, 2017-Q3 is perhaps shaping up to be the best quarter to date in 2017. The following chart compares where the cumulative number of dividend cuts announced in 2017-Q3 stack up against similar points of time in the two preceding quarters of 2017-Q1 and 2017-Q2.

Cumulative Announced Dividend Cuts in U.S. by Day of Quarter in 2017, 2017-Q1 vs Q2 vs Q3, Snapshot on 2017-09-18

Despite having the potential to be the best quarter in 2017, the pace of dividend cuts for the third quarter is at a level that is consistent with recessionary conditions being present in the U.S. economy. Based on our near-real time sampling of dividend cut declarations, those conditions are largely concentrated in the oil and gas industry, which has accounted for 23 of the 37 dividend cuts announced since 1 July 2017. The financial and real estate industries rank second, accounting for 10 of dividend cuts that have been announced so far during 2017-Q3.

Compared to a year ago however, we see that 2017-Q3 is faring slightly worse than 2016-Q3.

Cumulative Announced Dividend Cuts in U.S. by Day of Quarter, 2017-Q3 versus 2016-Q3

We'll wrap up the stories for dividend cuts in September 2017 and for 2017-Q3 on 3 October 2017.

Data Sources

Seeking Alpha Market Currents. Filtered for Dividends. [Online Database]. Accessed 18 September 2017.

Wall Street Journal. Dividend Declarations. [Online Database]. Accessed 18 September 2017.

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September 18, 2017

U.S. stock prices during the second week of September 2017 were largely driven by two news events:

  1. Actual damage from Hurricane Irma in Florida proved to be considerably less than had been projected.
  2. Inflation data put rate hikes back onto the Federal Reserve's table in the near future.

By "near future", the likelihood that the Fed would next hike short term U.S. interest rates went from last week's zero percent chance of happening anytime soon to a greater than 50% probability that they will act to make it happen in December 2017, where the CME Group's FedWatch Tool indicates that the market expects no change in rates to be announced at the Fed's meeting this week.


Probabilities for Target Federal Funds Rate at Selected Upcoming Fed Meeting Dates (CME FedWatch on 15 September 2017)
FOMC Meeting Date     75-100 bps 100-125 bps 125-150 bps 150-175 bps 175-200 bps 200-225 bps
20-Sep-2017 (2017-Q3) 1.4% 98.6% 0.0% 0.0% 0.0% 0.0%
13-Dec-2017 (2017-Q4) 0.6% 41.6% 55.6% 2.2% 0.0% 0.0%
21-Mar-2018 (2018-Q1) 0.4% 31.7% 52.0% 15.0% 0.8% 0.0%
13-Jun-2018 (2018-Q2) 0.3% 22.6% 45.9% 25.6% 5.1% 0.3%

The effect of this new information on stock prices can be seen in our alternative futures "spaghetti" chart.

Alternative Futures - S&P 500 - 2017Q3 - Standard Model - Snapshot on 15 September 2017

With investors shifting their forward-looking focus from 2018-Q2 to 2017-Q4, the S&P 500 rose to reach a record high during Week 2 of September 2017, although right now, the data suggests that investors are splitting their attention between 2017-Q4 and 2018-Q2, where stock prices are reaching toward the very top of the echo effect-adjusted range we indicated for 2018-Q2 just last week.

The thing to pay attention to this week that might more fully cement investor focus onto 2017-Q4 is the statement that will be issued by the Federal Reserve's Federal Open Market Comittee at the conclusion of its upcoming meeting on Wednesday, 20 September 2017, as well as the statements of individual Fed officials in the following days.

Looking backwards, here are the more signficant market moving headlines that caught our attention during Week 2 of September 2017.

Monday, 11 September 2017
Tuesday, 12 September 2017
Wednesday, 13 September 2017
Thursday, 14 September 2017
Friday, 15 September 2017

Meanwhile, Barry Ritholtz succinctly summarized the positives and negatives for Week 2 of September 2017.

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September 15, 2017

A 1977 classic short on the relative scale of everything in the universe.

HT: Quanta's Robbert Dijkgraaf, who linked the Charles and Ray Eames' film while discussing reductionism and emergence as the tools for solving the biggest mystery in physics today.

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September 14, 2017

The United States and China are the two largest national sources of carbon dioxide emissions on Earth. We thought it might be interesting to compare their annual CO2 outputs, from 1958 through 2015, which we've visualized in the following animated chart.

Animation: U.S. and China Annual Territorial Emissions of Carbon Dioxide, 1959-2015

As an interesting aside, from 1988 through 2015, both nations have emitted approximately equal amounts of carbon dioxide. Looking at the first and last years of that period, the U.S.' carbon dioxide emissions totaled 4,889 tonnes in 1988 and 5,093 tonnes in 2015, peaking at 5,790 tonnes in 2005.

Meanwhile, China emitted 2,368 tonnes in 1998 and 10,216 tonnes in 2015, with a peak value of 10,294 tonnes in 2014, almost doubling the U.S.' carbon dioxide emissions in that year.

References

Boden, T.A., G. Marland, and R.J. Andres. 2016. Global, Regional, and National Fossil-Fuel CO2 Emissions. Carbon Dioxide Information Analysis Center, Oak Ridge National Laboratory, U.S. Department of Energy, Oak Ridge, Tenn., U.S.A. doi 10.3334/CDIAC/00001_V2016: National Emissions v1.0 [Excel Spreadsheet]. November 2016. Accessed 13 September 2017.

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September 13, 2017

The U.S. Census Bureau has published its annual report on Income and Poverty in the United States, which we've used to visualize the cumulative distribution of income for U.S. individuals, families and households in the following animated chart!

Animation: Cumulative Distribution of Total Money Income for U.S. Individuals, Families, and Households in 2016

The cumulative income data applies for the 2016 calendar year, which the Census Bureau collected through its March 2017 survey sample, which they processed and published on 12 September 2017. Income data for the 2017 calendar year will not be collected until March 2018 and not published until September 2018.

If you would like to see static versions of the cumulative income distribution charts in the animation above for individuals, families and households, we can accommodate you! If you would like to estimate where you fall on the the income distribution spectrum in the U.S. using these charts, all you need to do is find your income on the horizontal axis, trace a vertical line up to where it intercepts the curve on the graph, then trace a horizontal line to the left side of the chart where you can roughly approximate your income percentile ranking on the vertical scale.

If you would like a more precise estimate, we have updated our "What Is Your Income Percentile Ranking?" tool with the 2016 income distribution data. Our tool can also estimate what your income percentile would have been in any calendar year from 2010 through 2015.

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