February 2, 2015

The Markets

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 was down about 3.1 percent and the Dow Jones Index was down 3.69 percent. Before you start listening to the media and internet “experts” 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. Last year investors sold all month to “capture” the last year’s gains. Once they got done selling they had nowhere to put it since savings accounts and CD’s had no real return and the next month the market rebounded with people buying right back in. This year the primary issue for negative returns was the weak oil prices. The big oil stocks have a huge impact on the Dow and S&P so if the oil stocks go down a lot (which they did) the index will reflect it.

While stock markets have struggled the Dow and the S&P 500 are down but still within 5 percent of their December record highs, the government bond market has been thriving. It was 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.

Student Loans

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.

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

“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

Image courtesy of Joe Mabel, used in accordance with the Creative Commons Attribution ShareAlike Unported 3.0 license.

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