1. Today's blog post reflects the fluctuation in the dividend yields on the S&P 500 and its 11 sector indices since the close of 2016. The S&P 500 is a market-capitalization weighted index.
2. The significant decline in the yield on the S&P 500 Communication Services Index in 2018 was a result of it being reconstituted from the S&P 500 Telecommunication Services Index on 9/28/18. The new index is comprised of 26 stocks, the majority of which were formerly members of either the S&P 500 Information Technology Index or the S&P 500 Consumer Discretionary Index.     
3. For comparative purposes, the yields on the 10-year Treasury note for the dates cited in the table were as follows: 2.45% (12/30/16), 2.41% (12/29/17) and 3.13% (11/14/18), according to Bloomberg. The financial media often compares the yields on dividend-paying stocks to what investors could earn on Treasuries. 
4. The dividend yield on the S&P 500 Financials Index has been trending higher of late in large part due to the Federal Reserve's ruling in 2017 that allowed banks to begin hiking their dividend payouts. We expect payouts to rise moving forward. Banks had been restricted in doing so following the 2008-2009 financial crisis. The yield on the S&P 500 Financials Index stood above the yield on the S&P 500 Index on 11/14/18. 
5. For the 12-month period ended 6/30/18 (most recent data), the S&P 500 Index paid out a record high $435.69 billion in dividends, up 7.02% from the $407.11 billion distributed for the 12-month period ended 6/30/17, according to S&P Dow Jones Indices. 

Equities were on a see-saw last week. The S&P 500 Index was down -2.8% thru Wednesday, only to pare losses and close last week -1.3%. The discretionary and technology sectors were laggards, while real estate and materials were the only positive returning sectors. Brick and mortar retail stocks were hammered after Nordstrom Inc. (-22% return) and Macy's Inc. (-12% return) announced disappointing earnings results. The worst performing technology stocks last week were Nvidia Corp. (-20%) and NetApp Inc. (-12%). Nvidia announced quarterly revenue and earnings below market expectations, which caused the stock to plummet on Friday. The advanced computer chip maker pointed to waning crypto-currency demand, which slowed sales and grew inventory. NetApp dropped after revenue was reported on the lower end of expectations. The supplier of flash memory appears to have strong end market demand in every category but government spending fell which management claimed was a timing issue. Oil dipped below $60 for the first time since February. After reaching $76 in early October, the commodity plummeted down to $55 on Tuesday, only to stabilize and trade slightly higher to end the week. Global growth concerns, a strong dollar and continued pumping all have contributed to the price drop. As a result, the S&P 500 Energy Index was one of the poorest performing sectors last at a -1.9% return. The worst performing stock in the S&P 500 Index last week was California utility PG&E Corp. (down -36%), which faces significant risks around the potential financial liability from fires in southern California. Edison International, another California utility, was also down -11% last week for similar reasons. Both PG&E and Edison did have large gains on Friday, after California Public Utilities Commission officials indicated that it would apply a cap when evaluating fire related expenses. Looking ahead to next week, investors will be focused on housing starts, consumer confidence and durable goods orders for confirmation of continued economic strength.

1. Investors directing capital into mutual funds and exchange traded funds (ETFs) continued to favor passive investing over active management on a massive scale for the 12-month period ended 9/30/18.   
2. Passive mutual funds and ETFs reported net inflows totaling $510.1 billion, compared to net outflows totaling $58.8 billion for those actively managed.
3. The two asset classes garnering the largest amount of net inflows for the 12-month period ended 9/30/18 were Taxable Bond at $279.2 billion and International Equity at $146.2 billion. 
4. The two active categories garnering more interest from investors than their passive counterparts were Municipal Bond and Commodities.   
5. We intend to monitor net flows moving forward.

1. Today's blog post shows how some major global stock indices have performed since the S&P 500 Index posted its all-time closing high on 9/20/18. 
2. From 9/20/18 through 11/12/18, the U.S. dollar rose by 3.87%, as measured by the U.S. Dollar Index (DXY), according to Bloomberg. 
3. The dollar's gains are likely a result of a flight to quality due to the ongoing trade tensions between the U.S. and China, in our opinion. Some pundits are concerned a prolonged battle could negatively impact global growth. A new trade pact would likely boost the prospects for domestic and foreign equities. 
4. While it appears that the foreign stock indices have held up better than most of the U.S. stock indices during the sell-off, consider the fact that the U.S. stock indices had significantly outperformed the foreign stock indices on a year-to-date basis. 
5. From 12/29/17 through 9/20/18, the NASDAQ 100, S&P SmallCap 600, S&P 500 and S&P MidCap 400 Indices were up 19.25%, 16.41%, 11.16% and 8.80%, respectively, on a total return basis, according to Bloomberg.
6. Over the same period, the Nikkei 225 Net, MSCI Daily TR Net World (ex U.S.), MSCI Europe Net, MSCI Emerging Net and MSCI EM BRIC Net posted total returns of 4.98%, -1.21%, -1.59%, -8.72% and -9.31%, respectively, according to Bloomberg.
7. Brian Wesbury, Chief Economist at First Trust Advisors L.P., is forecasting 3%+ average growth for the U.S. economy in 2018 and 2019. With no recession on the horizon until 2020 or later, we believe that investors should consider the recent sell-off as a potential buying opportunity. 

1. Today's blog post shows the yields on a couple of benchmark government bond maturities from key countries/economies around the globe.
2. We highlight where yields have trended since the U.S. 10-year Treasury note (T-note) hit its all-time closing low of 1.36% on 7/8/16, according to data from Bloomberg.
3. The 188-basis point (bps) increase in the yield on the 10-year T-note from 7/8/16 through 11/7/18 negatively impacted the performance of intermediate-term government bonds. 
4. The ICE BofAML 7-10 Year U.S. Treasury Index posted a total return of -7.82% (-12.95% price return vs. 5.13% income return) over that period, according to Bloomberg. For comparative purposes, the ICE BofAML 1-3 Year U.S. Treasury Index posted a total return of 0.28% (-3.88% price return vs. 4.15% income return) over the period. 
5. As indicated in the table, with one exception (Mexico), U.S. government bond yields have risen the most since the 10-year T-note bottomed on 7/8/16. 
6. Investors need to be cognizant of the fact that interest rates are still at low levels relative to their historical averages. Even though the yield on the 10-year T-note is up 188 bps from its all-time low, at 3.24% (11/7/18), it is still 150 bps below its average yield of 4.74% over the past 30 years, according to Bloomberg.
7. Bond investors have not had to cope with rising inflation for many years, in our opinion. The International Monetary Fund (IMF), however, sees inflation in "Advanced Economies" advancing at a rate of 1.8% in 2018 and 2019, up from 1.4% in 2017. It sees inflation in "Emerging Market and Developing Economies" rising from 4.3% in 2017 to 5.0% in 2018 and 5.2% in 2019. 

1. An argument can made that the stock market had become a bit extended through the first three-quarters of this year and was due for a pullback (decline of 5.00% to 9.99%) or correction (decline of 10.00% to 19.99%). 
2. That is exactly what we experienced in October 2018. The S&P 500, S&P MidCap 400 and S&P SmallCap 600 Indices posted total returns of -6.84%, -9.55% and -10.48%, respectively, for the month, according to Bloomberg. 
3. While sell-offs in the stock market are never a pleasant experience, they are a normal part of any bull market and can provide investors, particularly those with ready cash, a more favorable entry point into the market. 
4. As indicated in the table, trailing 12-month P/E ratios as of 11/5/18 are mostly lower than where they stood at the close of 2017. 
5. The estimated P/Es for year-end 2018 and 2019 also look more favorable due to October's sell-off and strong corporate earnings.
6. To lend some further perspective to valuation levels, we find the S&P 500 Index's 2018 year-end estimated P/E of 16.77 relatively enticing considering it matched the index's 50-year average P/E of 16.77 as of 11/5/18, according to data from Bloomberg.