Quotes of the Week
“Time flies when you’re having fun.” Albert Einstein
“Time’s fun when you’re having flies.” – Kermit the Frog
Last week started off with a steady sell-off in the markets. The Employment Report came out on Friday, and it was a Goldilocks moment. It was not too hot, not too cold, it was just right. The report came in at 164,000 new jobs for the Month of April. The Unemployment rate dropped below 4% at 3.9%. The markets really liked the report and recovered all the losses and finished just about even for the week. Last week the Dow was down 0.20%, the Nasdaq was up 1.26%, and the S&P 500 was down 0.24%. For the year the Dow is down 1.85%, the Nasdaq is up 4.44%, and the S&P 500 is down 0.38%.
The markets have been losing momentum since February. The highs have been lower, and the lows have been lower. This is a sign of a potential extended market decline.
This earnings season has been a mixed bag. Almost all corporations have reported higher earnings. However, most of that increase is due to the recently enacted tax cut. If you take out the positive effect of the tax cut, the earnings have been sort of blah.
I found this article interesting since I have been trying to talk to my daughter about the stock market. She is only in first grade but always asks me to explain what I do for work. Now after reading this article, I think I may wait to go into detail until she is in the fourth grade.
When to Start Teaching Children About Investing
Investing is one of those things just for grown-ups, right?
Not necessarily, according to Melanie Mortimer, who heads the foundation at the Securities Industry Financial Markets Association (SIFMA). The SIFMA Foundation encourages understanding of financial markets with programs like the Stock Market Game and InvestWrite.
“Fourth grade, for us, is the sweet spot” to start learning about investing, said Mortimer. “When you’re nine, 10 years old, you’re learning about fractions; you’re learning about decimals.” That provides a natural segue to teach kids about stocks of a company, or slices of the pie, she said.
“Students are very excited about the idea of money,” said Mortimer. “The idea that you can take something very small and grow it to be something much larger is very compelling for them.”
“Investing taps into the dynamism of the global marketplace,” said Mortimer. “It doesn’t sit still, and it’s changing and moving on a moment to moment basis, which is very similar to most 11-year-olds. They have a lot of energy, they’ve got a lot of interest; their attention is moving a mile a minute.”
So why fourth grade?
Mortimer said students have the capacity to understand rudimentary concepts that make the global markets work, like owning fractions of a company and trading stocks.
“It’s an extraordinary time of rapid brain growth, and there are so many lessons that students have not yet learned that they don’t have to unlearn,” said Mortimer.
Learning lessons about money while young can even benefit national economies. The World Bank found that not training young people to handle finance can cost a country 2% of its GDP.
“Early intervention has the greatest-long term benefits because you’re laying the groundwork, said Mortimer. “You’re setting the foundation, and you’re doing it at a time that it’s going to open the door for young people to make well-informed decisions that then benefit them in later in life.”
Fourth grade is also the time many students play the Stock Market Game, a hypothetical investing game built by SIFMA that uses real market data (offset by 10 minutes from current data) where students whose class participates are given a hypothetical $100,000 to invest how they choose. Mortimer said 600,000 students play each year, and they have found students are engaging even outside of class time by using the Stock Market Game smartphone app.
“We get emails and letters pouring in from parents saying ‘I don’t recognize my child anymore; he used to run up the stairs and go to his room and close the door until dinner, and now he’s downstairs, he’s engaging the family and talking about finance. He knows more than we do.’”
Cowles, Turner (2018, May 3) When to Start Teaching Children About Investing. Retrieved from https://finance.yahoo.com/news/start-teaching-children-investing-164343758.html?soc_src=community&soc_trk=ma
By the Numbers
SELL IN MAY? – In analyzing the S&P 500 since 1990, the 6-month periods ending on April 30th have beaten the 6-month periods ending on October 31st in18 of 28 years, i.e., the 6-month periods that began on May 1st and November 1stfrom 1990 through and including 2017. The 6-month periods ending April 30th are up +666% (total return) vs. a +89% gain for the 6-month periods ending October 31st. However, the 6-months ending April 30th have lagged the 6-months ending October 31st in 4 of the last 5 years (source: BTN Research). – Michael A. Higley, BTN 05-07-2018
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These are the opinions of Larry Lof and Stephanie Mayoral and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs. The S&P 500 is an index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly. Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.