A One-Year Treasury Bill Beat the Stock Market Over the Past Year

By Pam Martens and Russ Martens: September 3, 2019 ~

Steve Ricchiuto, Chief U.S. Economist at Mizuho Securities USA

Steve Ricchiuto, Chief U.S. Economist at Mizuho Securities USA

One year ago, investors could have purchased a one-year U.S. Treasury Bill with a yield of 2.47 percent. As of this past Friday’s closing price of the Dow Jones Industrial Average, the Treasury Bill would have beaten the performance of the Dow over the past year by more than three-quarters of a point (not taking into account dividends on the Dow stocks).

On Friday, August 31, 2018, the Dow closed at 25,964.82. This past Friday, August 30, 2019, the Dow closed at 26,403.28 That’s a gain of 438.46 points in a year or a return of 1.68 percent versus earning 2.47 percent on a T-bill.

You would have been saved yourself the agony of living through the 800-point market plunge on August 14 and the 3746-point rout in the Dow from the close of trading on November 30, 2018 until Christmas eve – marking the worst December performance since the Great Depression.

The meager performance of the Dow comes despite the $1.5 trillion tax cut that President Donald Trump signed into law on December 22, 2017. That tax cut, which reduced corporate tax rates from 36 percent to 21 percent, was supposed to boost economic growth and pay for itself. Instead, the U.S. Treasury Department reported earlier this month that for the first ten months of the government’s fiscal year, the deficit stood at $866.8 billion versus $684 billion for the corresponding period the prior fiscal year.

The Congressional Budget Office is projecting that the deficit will widen to $960 billion for the 2019 fiscal year; reach $1 trillion for the 2020 fiscal year; and then continue to rise every year for the next decade, reaching $1.4 trillion by the end of fiscal year 2029.

The Congressional Budget Office is also projecting that the total national debt outstanding will rise from $22.5 trillion at the end of this fiscal year (it’s actually already at $22.5 trillion), then increase by $1 trillion or more each year over the next decade to reach $34.4 trillion at the end of 2029.

Despite taking on massive amounts of new national debt to deliver a corporate welfare program masquerading as a tax cut, the U.S. economy has remained stuck in the same 2 percent average GDP range it has been in since it emerged from the epic Wall Street financial crisis. From 2010 through 2018, GDP has averaged 2.28 percent. When GDP hits the upper band of this range, for example 2.9 percent in 2015 and 2018, it invariably gives this back in subsequent years, for example, GDP reached only 1.6 percent in both 2011 and 2016.

And despite all of the promises for a big boost in GDP from the massive tax cut, the highly reliable Atlanta Fed’s GDPNow forecast as of August 30, is projecting that the U.S. economy will grow this year at an annual rate of just 2 percent.

As we previously reported, one of the first individuals to put the so-called “economic recovery” into proper perspective was Steve Ricchiuto, Chief U.S. Economist at Mizuho Securities USA. In February of 2015, Ricchiuto told a CNBC audience the following:

“…there’s also this wrong concept that I keep hearing over and over again in the financial press about this acceleration in economic growth. That isn’t happening. Last month we had a horrible retail sales number. We had a horrible durable goods number. We’re likely to have a very disappointing retail sales number coming forward. This month we’ve had a strong payroll number – we say everything’s great. It’s not great. It’s running where it’s been. It’s been the same thing for the last five years. There’s no improvement in the economy.”

In the United States, approximately 70 percent of GDP stems from consumption by the consumer. When workers are deprived of an adequate share of the nation’s income and wealth, they are crippled as consumers. Until the 1 percent’s share of the nation’s wealth and income is brought into proper balance, the stock market, GDP growth and the future of the democracy will all be at risk.

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