Well, I did not think the girl
Could be so cruel
And I'm never going back
To my old school
Actresses Felicity Huffman and Lori Loughlin are among dozens arrested and charged in a college admissions cheating scandal. For those of you who remember Full House and are wondering why Aunt Becky would do such a thing, the answer is probably the same as it always has been. To make sure her children get ahead, at any cost.
Apparently, Loughlin’s daughter, 19 year-old Olivia Jade Giannulli, was partying aboard a private yacht in the Bahamas owned by Rick Caruso, the chairman of the University of Southern California Board of Trustees, at the time her mother was being sought for arrest. Giannulli allegedly gained admission to USC by posing as a potential member of the college rowing team. She and her older sister withdrew from USC yesterday. It’s certainly appropriate to wonder what kind of life lessons these kids are learning, but the evidence is strong that having a college degree leads to lower unemployment.
The latest data from the Bureau of Labor Statistics shows that the unemployment rate for persons with a bachelors degree or higher is holding steady at about 2.2% compared to the overall unemployment rate of 3.8%. Even at the peak of the last recession when the general unemployment rate hit 10%, the college level unemployment rate was just half of that. There is a flip side of course. According to Student Loan Hero and the National Student Loan Data System, 65% of college seniors will graduate with an average student loan balance of about $30,000. It is estimated that total student loan debt is $1.5 trillion, or about $500 billion more than the total amount of credit card debt outstanding.
Oh, oh big ol' jet airliner
Don't carry me too far away
Oh, oh big ol' jet airliner
'Cause it's here that I've got to stay
The Federal Aviation Administration has issued an Emergency Order of Prohibition, effective immediately, prohibiting U.S. operators from flying Boeing Model 737-8 and 737-9 airplanes anywhere in the world, and further prohibits any non-U.S. operator from flying one within U.S. airspace. Boeing common stock (BA – NYSE) is down about 12.5% since the crash of Ethiopian Airlines Flight 302 in Addis Ababa last weekend, the second crash involving a 737-MAX within six months. Disruption to the U.S. airline industry should be minimal though. According to Flight Global and a research report from Cowen, there are only 72 Max 8s and 9s in service between Southwest, American and United. The airlines' relative fleet exposure to the Max is small. The aircraft represent just 2.5% of the mainline fleet at American, 4.5% at Southwest and 1.8% at United, the data shows. The Cowen analyst goes on to say that airlines will simply “keep older aircraft in service longer…..to alleviate stress on the network in the near-term.”
There's a feeling I get
When I look to the west
And my spirit is crying for leaving
From Capital Economics:
The second defeat of Theresa May’s Brexit deal in the UK Parliament has increased the risks to the UK economy by prolonging uncertainty and leaving a no deal a possibility. But for the world as a whole, we still expect the impact of even a no deal Brexit to be modest.
The UK Parliament voted against the second version of Prime Minister Theresa May’s Brexit deal last night by a very wide margin. There will now be a vote in London this evening on whether to pursue “no deal” and, if that fails, another vote on whether to request an extension of Article 50, which would delay Brexit beyond March 29th while negotiations continued. The most likely outcome seems to be an extension followed by a softer Brexit. But there is still a significant (perhaps 20%) risk of no deal either on or after March 29th. Note that it is the default position and even tonight’s vote will not take the possibility off the table.
Fill up your mind with all it can know
What would we be without wishful thinking
Don Molé, our senior economist, Matt Cushman, our head of equity research and I were discussing the outlook for the U.S. stock market for 2019. Just as a starting point, if the S&P 500 closes at 2900 for the year, that would imply only a 3% move from current levels, but would result in a total return for the year of about 17%, considering the already strong start to the year. Additionally, the current trailing twelve month price/earnings ratio of the S&P 500 is about 18. If the market gets to 2900, that would imply earnings for the S&P of 2900/18=$161. BUT, the current earnings estimate for 2019 is already $168. The point is, we already have a 12% - 14% total return (including dividends) in the bag for this year. In order to have a bad year in 2019, either the economy has to slow much more than expected causing the earnings multiple to contract, or, earnings themselves need to come way down. Neither is a most likely scenario considering our forecast for modest economic growth in the 2.5% range. What we are seeing is a bit of sector rotation as utilities, communications services and real estate have taken leadership over health care, industrials and consumer stocks. This only reinforces our continued emphasis on diversification as a foundation of any investment strategy.
My Old School – Steely Dan
Jet Airliner – Steve Miller Band
Stairway to Heaven – Led Zeppelin
Wishful Thinking - Wilco
Consumer sentiment rebounds
- The recovery in the stock market, the end of the government shutdown, lower unemployment, low inflation and tax refunds all likely contributed to a sharp rebound in consumer sentiment according to preliminary data from the University of Michigan.
- Both the present conditions and expectations components saw increases.
- Over 54% of consumers expect their incomes to be higher over the next twelve months.
The demand for labor remains strong
- The number of job openings rose to 7.5 million in January, a 15% year-over-year increase according to the latest Job Openings and Labor Turnover Survey (JOLTS) report. The number of available openings is 4.8% of the total labor force.
- Hires were also better at 5.8 million or 5% higher than one year ago.
- There were only 6.5 million persons unemployed in January resulting in 1 million more jobs available than the total number of people who are out of work. This is a fairly recent phenomenon that has not occurred in previous economic cycles. There is a persistent shortage of higher skilled workers.
- The number of persons who voluntarily quit their job increased slightly to 62.8% from 62%, indicating that workers feel very confident in their employment prospects.
Internet sales continue to grow at double digits
- E-commerce sales grew 12.1% year over year during the fourth quarter according to data from the U.S. Census Bureau.
- Internet sales have posted gains in 40 consecutive quarters and now make up almost 10% of all retail sales.
- Growth in internet sales should remain strong as important fundamentals are positive. The labor market will be key for consumer spending later in the year, as the unemployment rate should drift lower and support further growth in nominal wages. Other supports include low energy prices, high saving, low debt burdens, and generally available credit.
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