Like athletes
testing their limits, the Standard & Poor’s 500 and the Dow Jones
Industrials Indices both hit new highs last week. The S&P closed the week
above the 1,600 level for the first time, while the Dow climbed above the
15,000 mark on Friday before closing lower. Strong corporate earnings, gains in
the housing market, and good news from Europe helped support last week’s strong
performance.
Corporate
earnings season – the period when companies’ managements tell shareholders how
well the companies have performed during the previous quarter – is almost over.
Seventy-two percent of the companies in the S&P 500 have beaten analysts’ expectations,
according to information provided by FactSet and reported on MarketWatch. Since
1994, about 63 percent of companies have beaten expectations on average.
Housing market
news was largely positive last week. The Standard & Poor’s/Case-Shiller
20-city index of home prices was up 9.3 percent year-over-year through February
which was the largest gain in almost 7 years. Generally, cities that had seen big
price declines during the housing crisis realized the biggest gains, including
Phoenix, Las Vegas, and Atlanta. Cities experiencing strong jobs growth, such
as San Francisco, Seattle, and Dallas, also showed significant price gains.
In Europe, Italy’s
elected leaders finally resolved their political impasse and formed a
government. The highly-diverse coalition includes a record number of women, as
well as Italy’s first non-white minister. The new cabinet was sworn in on
Sunday, April 28. On Monday, Italy’s FTSE MIB, an index which reflects the
performance of the Italian stock market, the MSCI World Index, and several U.S.
stock markets moved higher.
does
money buy happiness… or doesn’t it? Many years ago, Richard Easterlin, a
Professor of Economics at the University of Southern California, studied the
relationship between happiness and money. He found that, over shorter periods
of time, happiness and income tend to move in tandem. “Happiness tends to fall
in economic contractions and rise in expansions.”
Over longer
periods of time, he found satisfaction with life (i.e., happiness) had little
relationship to rates of economic growth (i.e., people having more money). The
conclusion was once people have enough money to meet basic needs, they are as
happy as they are going to be.
A recent paper
from the National Bureau of Economic Research, written by economists Betsey
Stevenson and Justin Wolfers of the University of Michigan, appears to cast
doubt on Easterlin’s happiness-income paradox. The authors relied on data from
Gallup polls which asked people throughout the world how much they earned and on
which rung of the happiness ladder they were perched. While people in some
countries appeared to be happier than people in other countries, everyone – no matter
how much money they had – was happier when they had more money.
So, does more
money translate into more happiness or doesn’t it?
It may all come down
to your definition of happiness. After all, well-being is subjective as
Princeton’s Professor of Psychology and Public Affairs, Daniel Kahneman, and
its Professor of Economics and International Affairs, Angus Deaton, pointed out
in a 2012 paper. The pair evaluated two measures of happiness: life evaluation (satisfaction
with your place in the world) and emotional well-being (day-to-day happiness). The
researchers found that life evaluation increases steadily with income, while day-to-day
happiness maxes out an annual income of $75,000. They concluded “high income
buys life satisfaction but not happiness, and low income is associated both
with low life evaluation and low emotional well-being.”
Weekly Focus – Think
About It
“All
I ask is the chance to prove that money can't make me happy.”
--Spike Milligan, British comedian
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