After a week that left
investors wondering what’s next – much like fishermen on a lake as the wind kicks
up and the water gets choppy – the wind settled and the fish started biting.
U.S. stock markets posted their best weekly returns in almost two years last
week. When all was said and done, investors were $900 billion richer on paper,
according to experts cited by Barron’s.
One of the most interesting things about the week was that little changed. The Eurozone’s precarious economic state did not stabilize. The Middle East remained in an uproar. The Russia-Ukraine conflict persisted, complete with sanctions. Ebola continued to be a threat, although vaccines are in the works. The pace of growth in China did not accelerate. In fact, a working paper published by the National Bureau of Economic Research suggested:
“There are substantial
reasons that China and India may grow much less rapidly than is currently
anticipated. Most importantly, history teaches that abnormally rapid growth is
rarely persistent, even though economic forecasts invariably extrapolate recent
growth. Indeed, regression to the mean is the empirically most salient feature
of economic growth.”
Some things related to
China changed last week, though. It launched a new infrastructure bank along
with 20 other countries, including India. The bank is intended to complement or
rival the World Bank, depending on whose rhetoric you believe.
So, why did markets
bounce? Barron’s said it had a lot to
do with the Federal Reserve. As monetary policy has become less easy and volatility
has picked up, “turbulence was in the direction of deflation, with commodities
– especially crude oil – sliding and government bond yields plunging further
around the globe.” Enter St. Louis Fed President James Bullard who suggested
quantitative easing could be extended, if economic data supported it.
In other words, weak
inflation numbers could shape Fed policy and delay interest rate increases. That
was the story the numbers on the Chicago Mercantile Exchange told, anyway. The probability
of the Fed raising rates by September 2015 declined sharply last week, moving from
81 percent to 42 percent. The market’s strong positive response has been dubbed
the ‘Bullard Bounce.’
fourth place! When it comes to
financial literacy, the International
Financial Literacy Barometer indicates the United States ranks fourth out
of 28 countries. If you’re thinking those sophisticated Europeans must have an
edge on us, you’re wrong. The top five countries were Brazil, Mexico, Australia,
United States, and Canada.
The
rankings were determined by the answers to five questions:
1. Do you have and follow a household budget? The best budgeters were
in Brazil, Japan, Australia, South Africa, and Canada. The United States placed
sixth.
2. How many months worth of savings do you have set aside for
an emergency? The
best savers were in China, Taiwan, Hong Kong, Japan, and Canada. The United
States placed seventh.
3. How often do you talk to your children ages 5-17 about money
management issues? Parents
who talked most frequently about money with their children were in Mexico,
Brazil, Serbia, Bosnia, and Lebanon. The
United States placed sixth.
4. To what extent would you say teenagers and young adults in
your country understand money management basics and are adequately prepared to
manage their own money? More adults in Vietnam, Indonesia, India, Colombia, and
Mexico believed kids understood financial basics than in other countries. The United States placed 27th.
5. At what age do you think governments should require schools
to teach financial literacy to children so they can better understand money
management issues? People
in Brazil, Morocco, Thailand, Belarus, and Egypt wanted to talk with kids about
money at the earliest ages. Americans
said the government should require children to learn about money at about age
12. That put us in 21st place.
It’s
remarkable we placed fourth when our ranking on individual questions was lower
in every instance. Our final ranking was higher, in part, because the first
three questions were weighted more heavily than the latter two.
If
you’re interested in educating your children about money, a good place to start
(with younger children) may be with the Tooth Fairy. In 2014, the Tooth Fairy
left 8 percent less, on average, under kids’ pillows than in 2013. American children
received about $3.40 per tooth. Ask your children why that might be? Are kids
losing more teeth so the Fairy is paying less? Did the Fairy budget badly? Are
some teeth worth more than others (cavities versus no cavities)? It’s always
easier to learn when you’re interested in the subject!
Weekly Focus – Think About It
“Age is an issue of mind over matter. If you don't mind, it doesn't
matter.”
--Mark Twain,
American author
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