- 2010s will likely be remembered as a decade of disruption and prosperity
- Over the past decade, the labor market has improved, home prices and consumer spending have recovered and household balance sheets have continued to grow
- We believe the 2020s begin under different economic circumstances than when the 2010s began
- We wish you all a happy, healthy and prosperous New Year!
When the clock strikes midnight on New Year’s Eve, we’ll be toasting not only to a prosperous and healthy new year, but also, a new decade. As the calendar turns, it means we will be another decade removed from the Great Recession of 2008, an event which reshaped how many investors view risk and financial markets.
The 2010s will likely be remembered as a decade of disruption and prosperity. Smart phones and virtual assistants became the control panels of our everyday lives. A small, electric auto manufacturer when the decade began rose to become one of the largest in the world. Online shopping became incredibly efficient and a legitimate alternative to brick and mortar businesses. Overall, technological innovation continued to make the once difficult, easier and the seemingly impossible, possible.
Below, we highlight three charts that we feel capture the character of the decade for individuals that comprise the U.S. economy. Broadly speaking, it was a decade of relative prosperity.
1. Perhaps the biggest winner of the decade was the U.S. Labor Market, and by association, the consumer. When the decade began, the U.S. economy was still nursing back to health and unemployment was elevated. In 2010, that meant five people were unemployed (orange line) for every job opening (blue line). Today, after persistent economic strength, there is less than one unemployed individual for every job opening.
2. As the labor situation improved, so did personal consumption and home values. Personal consumption (orange line) measures how much money American consumers are spending. The U.S. consumer is often considered a key component of economic growth. The blue line, US House Price Index, measures price changes in residential houses. Home values were especially impacted during the recession of 2008, but recovered over the decade.
3. The chart below shows the aggregate net worth of U.S. households as tracked by the Federal Reserve and is calculated as the difference between total assets and liabilities. In short, the chart shows U.S. households, in aggregate, generally finished the decade wealthier than when the decade began.
We believe the 2020s begin under a different set of economic circumstances than when the 2010s began. Yet fear of recession and large market losses seem to remain a primary concern amongst investors. Leading economic indicators such as manufacturing new orders, work hours and the stock market, and as measured by the Conference Board and Organisation for Economic Co-operation and Development (OECD), have hopefully stabilized after a period of contraction. Leading economic indicators are often considered to precede changes in the economy. Additionally, the stock market is coming off a great year. Looking at historical S&P returns and past recessions since 1951, we find only two instances of a recession occurring in the year after the S&P 500 experienced gains in excess of 20%. Those years were 1981 and 1990. While this doesn’t mean a recession won’t occur, it does provide at least some reference.
This isn’t to say there won’t be challenges over the coming decade. History has showed there will be. However, we believe, the past decade has shown, that as consumers, investors and a country we are incredibly resilient. We are excited to see how advancement in the decade ahead contributes to future economic growth and prosperity.
We wish you all a happy, healthy and prosperous New Year!