Is the U.S. Economy Improving? Let the Numbers Speak for Themselves

Sometimes analyzing the past can be a good predictor of the future, and right now many indicators from the past suggest that the US economy is indeed improving…except for a few domains:

1 ) Sell in May and Go Away?
This old adage may not always apply. Despite the long-held theory that the economy is strongest from November through April, in truth, the stats show that the US economy has fared pretty well during the summer and fall—and is getting better. The aggregate total return for the S&P 500 for every 6-month period that began on May 1st during the years 1990 to 2008 was +19.7%. The total return for the S&P 500 in the single 6-month period from 5/1 to 10/31 in 2009 was even better, at +20.0% (source: BTN Research).

2 ) Do Interest Rate Hikes Help?
The last time the Federal Reserve began a series of interest rate hikes was almost 6 years ago. Over the 2-year period from 6/30/04 to 6/29/06, the Federal Reserve raised short-term interest rates 17 separate times. During that time period, the S&P 500 gained +15.5% (total return) (source: BTN Research).

3 ) Stock Returns Improving
As of 2/28/10, the S&P 500 had a trailing 12-month total return of +53.6%, a performance better than any 1-year return for the stock index at the end of any month in the last 20 years (source: BTN Research).

4 ) Stock Market at Almost a Trillion
The total capitalization of the US stock market increased by $900 billion during the first quarter of 2010 to $14.2 trillion. The value of the US stock market was $13.3 trillion at the end of calendar year 2009 (source: BTN Research).

5 ) Tax Rates and Taxes Paid
The last time the top individual marginal tax bracket increased was 1993, when it was raised from 31% up to 39.6%. Individual income tax receipts, however, remained constant at 17.5% of GDP in both 1992 and 1993. (Gross Domestic Product (GDP) is the annual market value of all goods and services produced domestically by the US.) (source:  IRS, White House).

6 ) Home Ownership Increases
At the end of 1989, there were 60 million families that owned a home and 34 million families that rented a home or an apartment. At the end of 2009 (i.e., 20 years later), there were 75 million families that owned a home (i.e., an increase of +25% over 2 decades) and 37 million families that rented (i.e., an increase of just +9% over 2 decades) (source: Department of Housing and Urban Development).

7 ) More Cash, Less Credit
Consumer borrowing (e.g., credit cards and auto loans but not including home mortgages and home equity loans) in the USA totaled $2.45 trillion as of 2/28/10. That amount of indebtedness is 3.6% less than the $2.54 trillion of consumer credit as of 2/28/08 (source: Federal Reserve).

Yet, not everyone is necessarily better off.

8 ) Not Paid Off
52% of retirees are still making monthly payments on home mortgage debt (source: Society of Actuaries).

9 ) Almost Nothing
27% of US workers surveyed have retirement savings of less than $1,000, not counting the value of their primary residence or the present value of any defined benefit pension plan they have accrued (source: Employee Benefit Research Institute).

10 ) Help Needed
2 out of 3 employees that have access to a pre-tax retirement plan at work (66%) acknowledge that they do not know as much about retirement investing as they should know (source: Transamerica).

At the same time, a lucky few are doing quite well.

11 ) College Grads Majoring in Engineering
Majors involving some variation of an engineering degree constitute 8 of the top 9 majors in terms of average salary offers in 2010. Students graduating from college in 2010 with a degree in Petroleum Engineering that have received job offers are anticipating an average first year salary of $86,220, the highest average salary for any college degree this year (source: National Association of Colleges and Employers).

12 ) Derivatives and Dugouts
The top 25 major league baseball players will make an average of $19 million each in 2010.  The top 25 hedge fund managers made an average of $1 billion each in 2009, or 53 times the average salary of the top 25 ballplayers (source: Absolute Return, Major League Baseball).

13 ) Show Me the Money
The last 3 World Series champions from major league baseball rank 1st, 2nd, and 4th in total payroll (out of 30 teams) for the 2010 baseball season which began a week ago. The 3rd highest team payroll belongs to the Chicago Cubs.  The Cubs last won the World Series in 1908 (source: MLB).