Weekly Reflection for July 23, 2021

Market Update

What a week this has been! Monday, July 19th was a starkly different day from the four that followed. All the major averages started out negative and stayed that way through the day. Analysts called the sell-off "orderly" based on the consistency of the losses; there was no flip-flopping that often occurs when panic sets into a trading day. The "reopening" businesses like banks and airlines were down; the "stay-at-home" trade did not work well either with technology also falling. Oil was down but it likely would have fallen anyway since OPEC+ has just finally, as of last weekend, agreed to pump more oil, releasing the pressure on supplies.

Leading up to Monday's stumble, there had been some indication of weakness around the market. The Russell 2000, which tracks small companies, which have been the darling of the recovering economy, are off over 7% from their March highs. Mid-cap stocks, based on the S&P 400, are down 6.5% and the Dow Jones Transports is down 8% from May highs. While not dramatic losses, these price shifts in the small companies and those that track how we move goods and people, are signaling that there is some momentum loss in the stock market.

Market breadth, a measure of how many stocks are participating in a rally, has also deteriorated even as the major averages have continued pushing higher with the help of the largest companies such as Apple and Microsoft. As of Thursday, July 15th, only 49% of S&P 500 companies were trading above their 50-day moving averages.

Many companies have reported robust earnings and investors have been selective about which stocks they will bid up. Because there is a little gaming that always happens, and a company gives analysts estimates that they feel comfortable beating, more than half of publicly-traded businesses release quarterly earnings that “beat” estimates. However, the average reaction to earnings reports is a drop of roughly 0.5%. Investors can be a tough crowd to impress.

The worries about COVID-19 spread, particularly amongst the unvaccinated, and inflation still are the most pressing concerns for the economy. The Federal Open Market Committee meets again next week to discuss those items and more. There will probably be as much conversation around employment as any subject, given that the Fed is more likely to remain accommodative as long as the unemployment rate is hovering around 6%.

Scams on the Rise

Last year the FBI received 791,000 complaints of fraud that led to losses exceeding $4.1 billion. Not everyone was willing to share their age but of those who did, nearly 30% were seniors, considered here as those over age 59. Thus, the FBI is increasingly concerned over this population's vulnerability to scammers. The true loss and number of victims is probably much higher as not everyone feels comfortable making a report due to embarrassment and worry that the event will lead to loss of their independence. While official losses were $1 billion in 2020, the FBI believes that the true amount stolen was closer to $3 billion. The average loss by one aged 60 or better was $9,175 in 2020 and nearly 2% lost more than $100,000.

Knowing how scammers approach their would-be victims is key. They use local phone numbers to trick you into thinking that they too are local. Best not to answer the phone unless you recognize the number. Many pretend to be a known organization like your utility company or the government, particularly the IRS. If you do pick up an odd call, hang up as soon as you realize it is fishy. Do not share any personal information over the phone no matter how engaging the caller may be. And, for example, If they are claiming to be your utility company, give a call directly back to that company to see what, if any problem, there really is.

A common and scary swindle is the confidence scam. A scammer who knows just enough about you, often from piecing together information found online, will claim that they know someone in your family who is currently in trouble and needs money. The scam can last as long as a single phone call with high pressure tactics to get you to immediately share financial information, or it may last for weeks and months as they gain confidence, and ultimately gain your bank account information. More seniors lost money to confidence, and similarly-executed “romance”, scams than any other, a total of $281 million.

Plenty of people younger than age 60 fell victim to cons but there is a clear correlation with age and amount of loss – higher age, higher loss. Perhaps it is the intentional targeting by the scammers to older people or perhaps the elderly are more patient and willing to hear out a caller, or emailer, with a story. Either way, the FBI, Congress and financial firms are very concerned about the escalation and are working to get the word out about how to protect people, both online and over the phone.

AARP has a list of things to do to help avoid identity theft, suspicious calls and scammers. To file an Internet complaint, click here. To ask us questions about how we are keeping your data safe with us, click here.

The Games

The 2020 Summer Olympics in Japan were expected to be an unprecedented success had 2020 not turned out the way that it did. Tokyo’s organizers were standing proud in 2019 with venue preparations ahead of schedule and ticket demand high. The Japanese public was firmly on board with the event at that time, excited to welcome as many as 2 million visitors with $2 billion dollars to spend during the 17-day event. The International Olympic Committee (IOC) declared Tokyo the most prepared host city in modern Olympic history.

This is what makes the games, for which the Opening Ceremony will be broadcast tonight, even more heartrending given what could have been. COVID-19 infections are rising again in Japan and most Japanese are against the continuation of the games. Tokyo has declared a state of emergency to last through August 22nd, though this seems to mostly impact gatherings of people, which are forbidden, and the serving of alcohol in restaurants, also forbidden. There will be no spectators and athlete personnel support has been cut to the bone. It will be a quiet, and more sober, two weeks of competition. Numbers help put the situation in perspective.

Number of times Japan has hosted: 4, in 1964, 1972, 1998 and now 2021.

Athletes: over 15,000, including paralympians; similar to 2016 participation.

Journalists and Officials: 79,000.

Spectators: 0, beyond those there to work or compete.

Time difference:Tokyo is 13 hours ahead of EST, 16 hours ahead of PST.

Japan’s Hosting Bill: initially budgeted to be $7.4 billion, then officially revised to $15.4 billion. Per Japanese auditors, the total is more realistically $20 billion.

Cost to delay to 2021: $2.8 billion to extend contracts, insurance, and so on.

IOC income: 73% from selling rights to broadcast, which has led some skeptics to believe the IOC was never going to allow a full cancellation of the games. (See chart below.)

Japanese still in favor of holding the Games: 34%, which reflects about the same low support as Prime Minister Yoshihide Suga has.

Medal payout: U.S. Olympians earn $37,500 for each gold, $22,500 for each silver and $15,000 for each bronze; all payments are pre-tax.

Months Until Next Games: 7 until the Winter Olympics in Beijing in February 2022.