As Janet and I were putting our Christmas decorations back in their containers for another season, we heard Doris Day singing "Que Sera, Sera" on one of our CDs. I thought, that's what I'll tell our clients when they ask me how the economy, the financial markets, and the presidential election will turn out in 2020. Whatever will be, will be.
We will have much more to say about the presidential election in the summer after the Democrats nominate their candidate.
Regarding the economy, it seems highly doubtful that we will enter a recession this year, given the wonderful state of the economy. The unemployment rate is as low as it's been in fifty years. In fact, there are six million unemployed people and seven million jobs begging for qualified employees. I'm not sure the United States has ever experienced this enviable situation. I hope you are doing what you can to guide your children and grandchildren to learn marketable skills in college or trade school. A third worthy option is military service.
And what about your money? 2019 was a banner year for all of us who invested in the great companies of the United States and the world (aka stocks or equities). Did you know that individual Americans sold more stocks than they bought last year? Think about that for a moment. In a year that saw overall returns well north of 20%, individual Americans were net redeemers of stocks. Corporations and institutional investors sucked up those bargains as individual Americans headed for the hills. Stocks had a 7% drop in May and that spooked millions of your fellow citizens out of stocks. Further, can you believe that in the ten-plus years since the bottom of the Great Recession's bear market in March 2009, the overall market has more than tripled, and - drum roll, please - individual Americans sold more stocks than they bought. That is beyond belief and, frankly, heartbreaking for me to realize how poorly so many Americans behaved in failing to build wealth over the past decade.
I believe the root of all failure to build wealth through equity investing is fear. I congratulate our clients who hold on when the equity markets slosh this way and that. We coach them to ignore the noise and keep their eyes on the prize: building wealth so they can enjoy multi-decade retirements filled with dignity, security, and independence.
Last month I wrote that I would report on the status of the shrinking middle class. Here's the good news: The middle income class and the lower income class are indeed shrinking, because they have been joining the higher income class for years. I can almost hear many of you gasping and screaming at me right now. Hold on a moment. Please read the article linked below,
Here is the takeaway: Adjusting for inflation, there are far more American households earning $100,000 (upper class) today than there were in 1968. There are also far fewer folks in the lower class (under $50,000) and the middle class ($50,000 to $100,000). Isn't that wonderful? (The study used inflation adjusted 2017 earnings to make an apples to apples comparison.)
A client recently told me that there are thousands of people in our county who are living paycheck to paycheck, or worse. I agreed with him because it is the truth. Janet and I have sat on many non-profit boards, so we are well aware of the folks on the lower rungs of the socio-economic ladder. It is our belief that we need to help these folks, and we wish that all wealthy people in the United States would open up their pocketbooks to help them. Thank God many do. Our faith demands that we help people who for any number of reasons just haven't made it on the economic food chain. But that does not take away the wonderful news that the vast majority of Americans are earning more income than ever (always on an inflation-adjusted basis).
According to CNBC (March 22, 2018), there were 700,000 new millionaires in the US in 2017. That means that almost 2000 households per day became millionaires. Jack Kelly reported in Forbes (October 22, 2019) that 675,000 millionaires had been added to America's total over the past year. Congratulations if you are one of many clients of Atchley Financial Group who became millionaires last year. So, let's celebrate the health of the US economy and the growing wealth and rising incomes of the American people.
Finally, we at Atchley Financial Group never make short-term predictions about the stock market because it is unknowable. In investing in the great companies (aka stocks or equities), we believe that pessimism will continue to get mugged by the reality that stocks can be a great way to build wealth over time.
So, 2020 will be an interesting year as we approach the November elections. How will things turn out? Que sera, sera.