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 fallâ€”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:Â 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.Â 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.Â The Cubs last won the World Series in 1908 (source: MLB).