8 Things That May Surprise You for 2015
- US auto and truck sales have been outstanding in 2015. Chrysler is at the highest level since 2005 and Ford had their best July since 2006.
- The average age of vehicles on the road is now 11.5 years old, a record length.
- New vehicle sales were 12.7 million in 2011, 16.5 million in 2014 and should exceed 17 million in 2015.
- The US and world stock markets have been volatile recently. This should NOT be a surprise.
- Stock markets can be volatile, especially over the shorter term.
- For 2015, the S&P 500 is down less than 1%.
- From 12 months ago, the S&P 500 is up over 2%.
- On Thursday, the S&P closed at 2,036. Three years ago, it was around 1,400.
- That is a 45% increase. Does that surprise you?
- Does that help you to focus more on the long term?
- Amazon’s market capitalization (value of all shares of its stock) is $242 billion.
- Amazon’s 2014 net sales were less than $100 billion, and lost money for 2014. Amazon reported $92 million of profits for the 2nd quarter of 2015.
- Wal-Mart had revenue of $482 billion for the fiscal year which ended January 31, 2015. Net income for the year was $16.4 billion.
- Wal-Mart’s market capitalization is now $221 billion, which is less than Amazon’s.
- It is hard to predict the future success of a company and their stock. The stock market clearly feels that Amazon will one day be more financially successful than Wal-Mart. Time will tell if these valuations are accurate.
- The price of crude oil has dropped from $57/barrel at the beginning of 2015 to approximately $41/barrel today.
- The US Energy Information Agency “Annual Energy Outlook 2015” predicted prices well above $50 per barrel, with “prices to rise steadily after 2015” up to $80 per barrel in 2020. Their “high oil price” scenario predicted $122 per barrel for 2015.
- This shows how difficult it is to make forecasts and why predictions should generally not be followed in making investment decisions.
- The 10 year total annualized return for General Electric stock is .06% per year (almost 0% per year), through 8/19/2015. GE stock purchased for $1 million 10 years ago would still be worth about the same today.
- During the same 10 year period, the S&P 500 has returned 7.73% on average per year. The same $1 million invested in the S&P 500, 10 years ago, would now be worth $2,020,000.
- This shows the risk of investing in one stock. Even though a company is considered to be “blue chip,” it may not be successful stock to hold forever.
- The Federal Reserve was widely expected to increase interest rates this year.
- The 10 year Treasury Note was 2.173% on 12/31/14.
- The yield has actually gone down, not up, and is now 2.085%.
- Predicting short term interest rate moves is very difficult and why we build balanced fixed income portfolios.
- The top US individual income tax rate is 39.6%
- In 1977, the top tax rate was 70% for income above $203,200.
- In 1982, the top tax rate was 50% for income above $85,600.
- Did you realize how much this has changed and how high rates were a few decades ago?
- US crude oil production is around 9.4 million barrels per day.
- Production almost doubled from 5 years ago.
- In 2010, 5.5 million barrels were produced per day.
- This would not have been predicted. Great technological breakthroughs led to production increases and will have significant societal impacts.
It should not be a surprise that we, as a society, are continually surprised by what the future brings. Uncertainty is always with us. Our investment approach is designed to help you effectively deal with this uncertainty.
Note: The sources for this blog post are available upon request
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