If you’re feeling whiplashed from the
mid-week collision of good and bad economic news, you’re not alone.
On Wednesday, the Federal Reserve’s Open
Market Committee (FOMC) meeting minutes were released and investors were
reassured by what they read. Although the Fed lowered its Gross Domestic
Product (GDP) growth projections for the first half of 2014, the minutes
indicated real GDP is expected to grow faster over the next few years than it
did last year (FOMC Meeting Minutes, Staff Economic Outlook, paragraph 1). In
addition, “to support continued progress toward maximum employment and price
stability, the Committee today reaffirmed its view that a highly accommodative
stance of monetary policy remains appropriate” (FOMC Meeting Minutes, Committee
Policy Action, paragraph 2). Reassurance the Fed would not increase the federal funds rate sooner than expected was received
with gusto and all three major U.S. stock indices raced ahead finishing the day
up more than 1 percent.
On Thursday, good news about the world’s
largest economy (United States) ran right into
not-so-good news about the world’s second largest economy (China). Economic
indicators suggested China’s economy might be slowing faster than anyone expected.
MarketWatch reported, “[China’s]
Exports fell 6.6% from a year earlier, slower than the more-than-18% tumble in
the previous month, but widely missing a Dow Jones survey consensus for a 4.2%
gain. Imports were even uglier, plunging 11.3% – more than the 10.1% drop in
February – and trailing far behind an expected 2.8% gain.” When trading ended
on Friday, the Standard & Poor’s 500 was down 1.8 percent for the year, the
Dow was off 3.3 percent, and the NASDAQ had lost 4.2 percent of its value.
When markets get dramatic, it may be a
good idea to stay calm and remember one of the most basic tenets of investing:
Buy low, sell high.
there’s a new index in town… About five years
ago, the World Economic Forum’s Global Agenda Council proposed a new index be
developed, one that would “increase the impact that social entrepreneurs,
business leaders, and policy makers can have in the world.” The general idea was
the new index would measure social progress and spur competition between
nations to improve the environment for social innovation in much the way the
Global Competitiveness Index assesses the drivers of economic productivity and
prosperity and identifies nations that are most competitive.
Just
48 months later, the Social Progress Index (SPI) was born. The beta version of
the index debuted in 2013 and focused on measuring the extent to which 50 countries
met the non-economic needs of their citizens. The 2014 SPI gauged 54 social,
health, and environmental factors across 132 countries, considering only outputs
(like literacy) and not inputs (like spending on education). When the numbers
were tallied, New Zealand was number one – even though it’s in 25th
place when measured by GDP per person (SPI, pg 62).
According
to The Economist, when the results of
the SPI are compared with a country’s GDP per person, its value truly becomes
apparent. The publication quoted Michael Porter, a professor at Harvard
Business School, who said, "There is a view that economic development and
social progress go hand in hand. That's true on average, but not in particular."
For example, Costa Rica and Iran have similar GDPs, but Iran falls far lower on
the scale of social progress. Brazil and Kuwait are about equal in terms of
social progress, although Kuwait’s GDP per person is multiples greater than
that of Brazil.
So,
how did the United States do? We’re in 2nd place for GDP per person and 16th
for social progress (SPI, pg 63). A New
York Times Op Ed piece summarized the scores like this, “In the Social
Progress Index, the United States excels in access to advanced education but
ranks 70th in health, 69th in ecosystem sustainability, 39th in basic
education, 34th in access to water and sanitation, and 31st in personal safety.
Even in access to cellphones and the Internet, the United States ranks a
disappointing 23rd, partly because one American in five lacks Internet access.”
Will
the United States respond by improving the environment for social innovation as
the developers of the index had hoped? Stay tuned. The results of the 2015 SPI
will be out in just another year.
Weekly Focus – Think About It
“The price of
success is hard work, dedication to the job at hand, and the determination that
whether we win or lose, we have applied the best of ourselves to the task at
hand.”
--Vince Lombardi, former Coach
of the Green Bay Packers
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