Graduation season is in a bit of a hiatus, with most colleges now having completed their commencement ceremonies and high school commencements are in full swing.
Over the Memorial Day weekend, our family had the great pleasure of attending my daughter’s graduation from the College of Arts and Sciences at Cornell University. I personally was especially proud and moved by her accomplishments, as she not only attended my alma mater, but also majored in English, as I did. I was thrilled to speak with one of her senior year English professors, who, believe it or not, was my senior thesis advisor some 42 years ago.
It was quite a series of impressive events over the long weekend. One of the highlights was the convocation speaker, actor Ed Helms, of the TV show “The Office†and the “Hangover†movie series.
His speech had a great deal of humor, but also some inspiring moments. He began his talk by asking the assembled dignitaries on stage, “You do know you invited Ed Helms to speak don’t you—not Andy Bernard?†(Andy Bernard was the bumbling but likable character of “The Office,†who took every opportunity to mention he graduated Cornell.)
The commencement speaker was the President of Cornell, Dr. David Skorton. Skorton delivered a though-provoking address on a brilliant, sunny day and in front of a football stadium-filling crowd of some 40,000 soon-to-be graduates and their families and friends.
He singled out several impressive students for their achievements, spoke of social responsibility for all students as they enter their careers, and urged them to “create a virtuous cycle of building human capital.â€
One could not help but think of the challenging economic and employment situation facing today’s graduates—and all Americans—in listening to his speech. We know that the job market is difficult, not only for new graduates, but for people across age groups.
Bloomberg recently reported that Generation X (those born between the mid-1960s and 1980) lags behind other generations in building assets, with the effects of the 2007-2009 recession hitting both their modest portfolios and their housing assets.
And the news media is full of reports on a daily basis noting the retirement crisis for many Baby Boomers. A recent Gallup poll found that 59% of those surveyed were very or moderately worried that they won’t have enough money for retirement – by far their biggest concern.
Sound financial and investment planning is essential for people of all ages—and it is never too late for either Boomers or those Gen X’ers. Nor is it too early for those just embarking on careers, like these new graduates. And, of course, here at Flexible Plan Investments, we strongly believe that risk mitigation and active investment management should be a strong component of that planning. The evidence over the long haul and through full market cycles is compelling.
Last week, the US equity markets saw their own version of “graduation,†with the S&P 500 fairly decisively breaking out of the sideways pattern seen for much of 2014.
While the bears still have plenty of arguments on their side—from geopolitical risk, to technical divergences, to slow growth, to an “aging†bull market—even the most pessimistic market observers had to acknowledge the resumption of the uptrend as the S&P ended the week higher by 1.3%. Even more encouraging for bulls, the NASDAQ Composite, which along with small-caps has been one of the most volatile indices this year, moved higher by 1.9%.
While it is hard to credit any one specific factor for the S&P’s break-out, certainly the European Central Bank’s announcement of further stimulative policies was one of the major reasons. Last Friday’s employment report (6/6) also did not hurt, as a new all-time high in jobs was reached and the recession’s 8 million-plus job losses finally overcome. However, cynics are quick to point out that this was the longest post-recession jobs recovery since WWII, and the impact of population growth and workers leaving the labor force has kept the labor participation rate at one of the lowest levels in 40-50 years.
Bespoke Investment Group ran a fairly exhaustive analysis of the US equity market’s performance after a new post-recession jobs high is reached. They concluded that “If history is any guide, the next one, three, and six months may be a period of lackluster and below average (though not necessarily negative) returns.†While the historical performance cited below is tilting toward the positive side, Bespoke’s analysis supports the theory that equity markets in post-recession recoveries have often been “out in front of†the labor recovery.
Source: Bespoke Investment Group
While last week was full of economic data (some 22 reports, with 12 exceeding expectations, the ECB’s blockbuster announcements, and the big employment report), this week looks to be much quieter. With only 12 economic reports of note, retail sales, jobless claims, Producer Price Index data and the University of Michigan Consumer Sentiment report top the agenda. According to Bespoke, major indices such as the S&P 500 are touching the upper range of overbought territory, and this, combined with a lack of major catalysts, might point toward some short-term market consolidation.
No matter the market’s upcoming movements, let’s all hope the employment situation keeps improving. And I am certainly pulling for those new college grads, my daughter included, to be well-represented in the statistics.
Have a great week.
DavidÂ
