Things are not as bad as the media would have you believe

Queen Elizabeth II turned ninety years old on April 21st.  While I don’t follow the Royal Family all that closely, I do love Princess Kate’s fashion sense and have a thing for sparkly tiara’s (the real ones).  So naturally when I saw an article about the Queen’s birthday I had to check it out.  In addition to some great shots of the Crown Jewels, I found one of the Queen’s comments particularly uplifting.  When asked about the state of the world, Elizabeth unequivocally said that things are much better today than when she was a child.  Although recent headlines – from terrorist attacks to slowing global growth – would have us believe otherwise, I’d like to provide some much-needed evidence that we’re living in pretty good times.

First, Americans are living longer and are healthier than ever before in history.  In 1800 the U.S. life expectancy was 39 years at birth, then 49 years in 1900, 68 years in 1950, and an incredible 79 years today!  In addition to a longer life expectancy, we can take advantage of our twilight years with something called retirement.  The concept didn’t exist in the U.S. prior to the late 1880’s, when workers pretty much labored until they died.  That started to change in 1875 when American Express offered America’s first employer-provided retirement plan.  The Federal Government followed suite in 1935 with the creation of Social Security; and medical health benefits for those over 65 years, also known as Medicare, started in 1965.

According to the Federal Reserve, the number of years spent in leisure – measured as retirement plus time off during your working years – rose from 11 years in 1870 to 35 years by 1990.  While we’re not all experiencing a Downton Abbey lifestyle, things could be worse.

Concerning crime and violence: while the tragic terrorist attacks in recent years are difficult to reconcile, overall murder rates in the U.S. have dropped dramatically since the 1990’s.  America averaged 20,919 murders during that decade but the average number of murders in the 2000’s dropped to 16,211.  On a global level, a report from the Human Security Report Project suggests the world is getting safer, as it relates to people killing other people.  Deaths from war has been in decline since the end of World War II and high-intensity conflicts have declined by more than half since the end of the Cold War.  The report goes on to say that terrorism, genocide, and homicide numbers are also down.

Americans often worry that slowing U.S. growth and rising debt levels will result in a downward economic spiral.  They often point to Japan as a worst-case-scenario.  While the island nation has its challenges, consider that Japanese unemployment has remained below 5.7% for the last 25 years, income per capita adjusted for purchasing power continues to grow at a healthy rate, and life expectancy is on the rise.  Plus I hear they have amazing sushi.  I can think of worse outcomes.

Another common concern I read about is stagnant wage growth.  While I believe this is an important issue, consider that the median annual household income adjusted for inflation was about $25,000 in the 1950’s.  Today it’s almost double that!

A few other things that are better: U.S. death rate from strokes has declined by 75% since the 1960s; deaths from heart attacks have also dropped dramatically; more Americans attend college today than at any other time in our history; smoking is down sharply; poverty is on the decline in the U.S.; and fewer people around the world die from famine each year.

Happily, I could go on, but I won’t.  Suffice it to say that Queen Elizabeth II, in her 90 years of experience and wisdom, may be right.  And even if she’s not, we’re all better off believing she is.

Carrie A. Tallman, CFA
Director of Research

?????????????????????????????????????????????

Share this:

Market Update Through 12/31/2015

Total Return

Index

12 months YTD QTD

Dec

Stocks
Russell 3000 0.48% 0.48% 6.27% -2.05%
S&P 500 1.38% 1.38% 7.04% -1.58%
DJ Industrial Average 0.21% 0.21% 7.70% -1.52%
Nasdaq Composite 6.96% 6.96% 8.71% -1.92%
Russell 2000 -4.41% -4.41% 3.59% -5.02%
MSCI EAFE Index -0.81% -0.81% 4.71% -1.35%
MSCI Emerging Markets -14.92% -14.92% 0.66% -2.23%
Bonds
Barclays US Aggregate 0.55% 0.55% -0.57% -0.32%
Barclays Intermediate US Gov/Credit 1.13% 1.13% -0.73% -0.35%
Barclays Municipal 3.64% 3.64% 1.66% 0.77%

Commodity/Currency

Current Level Prior QTR Level TTM High

TTM Low

Crude Oil

$37.04

$45.09 $65.61

$33.77

Natural Gas

$2.34

$2.52 $3.57

$1.81

Gold

$1,060.20

$1,115.20 $1,305.70

$1,045.40

Euro

$1.0863

$1.1163 $1.1835

$1.0522

Share this:

SDG Market Indicator: Future Nobel Prize Winner?

Every day, it seems someone has a new model that claims to predict the next stock market meltdown or boom.  Two of my colleagues, Mark Lewis and Sarah DerGarabedian, and I had a stock market theory we tested a couple of years ago.  We called it the “SDG Market Indicator.”  

At the time, Sarah’s almost one-year-old son was having some difficulties sleeping through the night.  Whenever she did not get a good night’s sleep, we noticed on most of those days the stock market dropped.  Over a 48-day period, we compared her sleep cycle against the market’s performance.  If she slept well the night before, the market increased 42 percent of the time.  The market was either flat or declined 58 percent of the time when she had an average to bad night’s rest.  

You are probably saying to yourself, “This is the stupidest thing I have ever heard.”  You are right.  Some people accept far-fetched theories like the SDG Market Indicator as sound market guidance, though.  As they chase the next theory’s prediction, they risk losing more than they could potentially gain.  

Market timing statistically does not work.  A study by Morningstar highlights the dangers of market timing.  This study shows that, during the period 1926 – 2009, an investor who invested $1 in stocks would now have $2,592.  The study also shows that if that investor missed the 37 best months during this time frame, but was otherwise invested in stocks, the investment would only be worth $19.66 at the end of 2009. 

At Parsec, we prefer to take the long-term view when evaluating the market.  It is impossible to predict on a day-to-day basis what the market will do.  However, as studies have shown, the market will eventually recover from declines.  It is all part of the cyclical nature of financial markets.  

The next time you see a hot new theory, just think of the SDG Market Indicator.  Now, I am off to force feed Sarah a turkey sandwich and slip an Ambien in her tea.  It is time for a few positive days in the market.

Cristy Freeman, AAMS
Senior Operations Associate

Share this: