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Market Commentary
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Weekly Commentary
September 13, 2010
The
Markets
If you
had an extra $1,000, would you use it to reduce debt or would you spend it on
something discretionary?
How
Americans answer that question may significantly impact economic growth over
the next few years, according to an August 20 report from Federated Investors.
If Americans decide to focus on debt reduction that could keep a lid on economic
growth in the near term, but would likely be good for the economy over the long
term. Conversely, if Americans start spending freely, it may boost short-term
growth, but it might delay our day of reckoning and make it worse down the
road.
Another
factor that comes into play here is demographics. The leading edge of the much
chronicled Baby Boom generation is now in its mid-60s and their peak spending
years are behind them. When this group hit their peak spending years back in
the 1980s and 1990s, the U.S.
economy and stock market roared. Now that the cohort is entering their 60s,
their spending is slowing down.
Generation
X follows on the heels of the Boomers, but their numbers are significantly
smaller so they won't be able to pick up the slack.
From a
longer-term demographic perspective, the good news is that Generation X is
followed by the Millennials. Influential authors William Strauss and Neil Howe
define the Millennials as people born between 1982 and 2001. At about 85
million strong, the Millennials are even larger than the Baby Boom generation,
according to Advertising Age. As the
Millennials reach their peak spending years, we could possibly see another
economic resurgence in roughly the 2020-2040 period, according to HS Dent, an
economic research and forecasting company.
Demographics
help define potential longer-term trends and are useful in putting the current
economic environment in context. And, with demographics in mind, Americans may
be more likely to save that extra $1,000 instead of spending it on the latest
gizmo.
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Data
as of 9/10/10
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
| |
Standard &
Poor's 500 (Domestic Stocks)
|
0.5%
|
-0.5%
|
6.4%
|
-8.6%
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-2.2%
|
-2.9%
| |
DJ Global ex
US (Foreign Stocks)
|
0.1
|
-1.5
|
3.2
|
-8.4
|
1.5
|
1.6
| |
10-year
Treasury Note (Yield Only)
|
2.8
|
N/A
|
3.3
|
4.3
|
4.2
|
5.8
| |
Gold (per
ounce)
|
0.5
|
12.9
|
25.8
|
21.0
|
22.7
|
16.4
| |
DJ-UBS
Commodity Index
|
0.5
|
-2.6
|
7.8
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-7.0
|
-4.1
|
2.0
| |
DJ Equity All
REIT TR Index
|
-1.8
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18.4
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34.5
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-3.5
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1.7
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10.5
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Notes: S&P
500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested
dividends (gold does not pay a dividend) and the three-, five-, and 10-year
returns are annualized; the DJ Equity All REIT TR Index does include reinvested
dividends and the three-, five-, and 10-year returns are annualized; and the
10-year Treasury Note is simply the yield at the close of the day on each of
the historical time periods.
Sources: Yahoo!
Finance, Barron's, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of
future results. Indices are unmanaged
and cannot be invested into directly. N/A means not applicable or not available.
"ANYBODY WHO THINKS
MONEY WILL MAKE YOU HAPPY, HASN'T GOT MONEY," according to billionaire David Geffen. Now we have a new scientific study
that helps quantify the connection between money and happiness.
Researchers Daniel Kahneman and Angus
Deaton of Princeton
University analyzed data
from the Gallup-Healthways Well-Being Index and tried to determine how income
affects an individual's emotional well-being and overall life satisfaction.
They measured emotional well-being as an individual's day-to-day level of happiness
(e.g., how much enjoyment, laughter, smiling, anger, stress, or worry they
experience each day,) while overall life satisfaction was measured as an
individual's satisfaction with their life in general.
Here's what they found.
As a person's annual income rises up to
about $75,000, their emotional well-being, or day-to-day happiness, rises, too.
But, beyond $75,000 in annual income, there was no additional boost to
day-to-day happiness, according to the researchers' article published in the Proceedings of the National Academy of
Sciences and reported by Inc. magazine.
What's the key to $75,000? According to
LiveScience.com, "The researchers suggest that making anything more than
$75,000 no longer improves a person's ability to spend time with friends, avoid
pain and disease, and enjoy leisure time--all factors involved in emotional
well-being."
Ah, but more money does increase overall
life satisfaction. According to the Inc.
article, "With every doubling of income, people tended to say they were more
and more satisfied with their lives on a 10-point scale--a pattern that
continued for household incomes well above $120,000."
Do these findings match your life
experience? Let us know what you think.
Weekly
Focus - Think About It
"An
object in possession seldom retains the same charm that it had in pursuit."
--Pliny
the Younger
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