It’s true. January did not turn out to be the
best month for U.S. stock markets. At the end of the month, the Standard &
Poor’s 500 Index (S&P 500) was down about 3.1 percent. Before you start
listening to pithy observations – the saying ‘as goes January, so goes the
year’ has been making the rounds – think back to January 2014. The S&P 500
finished the month down 3.6 percent and still managed to deliver positive
performance (up 11.4 percent) for the year.
That said, there is a lot going on around the
world and it’s making markets as feisty as a broody hen. Some of the issues
include:
·
Low, low oil prices: Oil prices are a boon to consumers at the
pump and a detriment to the oil industry which has suffered layoffs and
cancelled projects, according to Barron’s.
·
Greek elections: The Syriza party won the Greek election on
promises to reduce austerity measures and restructure Greek debt. Forbes reported there is uncertainty
about how this will affect the Greek economy and the euro.
·
Currency issues: The Federal Reserve is tightening monetary
policy while other central banks are easing. With the value of the euro
dropping from $1.45 to about $1.15, U.S. exports are getting more expensive
overseas, but it has become a lot cheaper for Americans to travel to most parts
of Europe.
·
Deflationary pressures: CNBC.com
reported prices in the Eurozone fell 0.6 percent year-to-year in January. That
was after a 0.2 percent decline in December. Some folks are worried inflation
in the U.S. could be headed south, too, if the Federal Reserve raises interest
rates too much, too soon.
While stock markets have been struggling (the
Dow and the S&P 500 are down but still within 5 percent of their December
record highs, according to Barron’s),
the government bond market has been thriving. Experts cited by Barron’s estimated about 16 percent of
the government bonds they track, about $3.6 trillion worth, traded at negative
yields last week. MarketWatch.com
reported, for just the fourth time in more than 50 years, the dividend yield on
the S&P 500 Index was higher than the yield on benchmark 10-year Treasury
bonds last week.
Its value is estimated at more than $1 Trillion…
Is it the
2014 U.S. government-spending bill?
Is it the 282
billion Big Macs?Is it 3.1 million Ferrari 599 GTBs?
Is it the amount of U.S. currency currently in circulation?
All of the
above are estimated to be worth more than $1 trillion and so is student loan
debt in the United States. Outstanding student loans are roughly equal to all
of the greenbacks circulating the world. According to The Wall Street Journal:
“Ever-escalating tuitions, especially in the past dozen years,
have produced an explosion of associated debt as students and their families
resorted to borrowing to cover college prices that are the only major expense
item in the economy that is growing faster than health care. According to the
Federal Reserve, educational debt has shot past every other category – credit
cards, auto loans, refinancings – except home mortgages, reaching some $1.3
trillion this year.”
The Journal said about 70 percent of 2014 graduates
borrowed to pay for college, and they left school with an average debt of $33,000.
The amount owed varies significantly by state, according to U.S. News & World Report. In 2013, students in New Hampshire,
Delaware, Pennsylvania, Rhode Island, and Minnesota graduated with debt
exceeding $30,000 on average, while those in New Mexico, California, Nevada,
the District of Columbia, and Oklahoma had debt of less than $20,000 on
average.
While there
may be some attractive alternatives for student borrowers – including income-based
repayment loans and crowdfunding for college – the Journal cited statistics
showing America’s student debt could be negatively affecting our country’s
economic dynamism. The percentage of younger Americans who own part of a
business dropped from 6.1 percent to 3.6 percent between 2010 and 2013. Also, during
the past decade, the percentage of new businesses started by people younger
than age 34 fell from 26.4 percent to 22.7 percent.
Weekly
Focus – Think About It
“If your
actions inspire others to dream more, learn more, do more and become more, you
are a leader.”
--John Quincy Adams,
Sixth U.S. President
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