Welcome to the official Sandy Spring Bank Blog! To visit our main web site, visit www.SandySpringBank.com

The Sandy Spring Way

With the enthusiasm of new love, American stock markets pushed higher during Valentine’s week.

February 17th, 2014 | By Beau Mercer

Beau MercerWere investors enamored of the Federal Reserve’s new Chairwoman, Janet Yellen, who spoke on behalf of the Fed for the first time last week? Some suggested investors appreciated her dedication – she spent almost six hours answering questions from members of the Financial Services Committee – and were soothed by her commitment to continuing the policies of her predecessor. The New York Times said stock markets rose as a result of Ms. Yellen’s testimony and were further buoyed when the House voted to raise the government’s borrowing limit until March 2015 without any conditions.

Perhaps investors saw the good in employment numbers that were released recently. An analyst quoted in Barron’s said the American labor market “just might be tighter than most of us expected.” His argument was while long-term unemployment remains high, “…2.5 percent, higher than peaks seen in prior recessions, and much worse than the 50-year average of 1.1 percent,” the short-term jobless rate (measuring people who are out of work briefly) is 4.2 percent which is below the 50-year average of 5 percent. The article shared the thoughts of another expert, Michael Darda of MKM Partners:

“If our job market can mend even when gross domestic product (GDP) growth averaged a lousy 2.4%, what happens if growth picks up? Last week, Treasury data showed the federal fiscal deficit shrinking to just 3% of GDP from more than 10% four years ago thanks to higher taxes and restrained government spending. At this pace, our budget deficit could fall to zero next year, and we could run a surplus by 2016.”

Tarnishing this shiny outlook is the fact 36 percent of Americans who want a job and can’t find one have been unemployed for more than 27 weeks.

Maybe it was an unrequited desire for better weather. Huge swathes of the United States have been gripped by snow, ice storms, and freezing weather which Reuters.com suggested caused many investors to discount weak economic reports in the belief consumer spending and the company performance might have been stronger if weather conditions had been more favorable.

Data as of 02/14/14 1-Week YTD 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks)

2.3%

-0.5%

20.9%

11.3%

18.4%

4.7%

10-year Treasury Note (Yield Only)

2.8

NA

2.0

3.6

2.7

4.1

Gold (per ounce)

4.8

9.9

-19.8

-1.1

7.0

12.4

DJ-UBS Commodity Index

1.7

3.9

-6.4

-7.1

4.8

-0.8

DJ Equity All REIT TR Index

2.5

6.6

4.3

9.9

25.4

8.7

Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

HOW MANY HOURS DO YOU WORK EACH WEEK?

It’s a topic that has garnered significant interest for some time. In 1930, British economist John Maynard Keynes wrote:

“For many ages to come the old Adam will be so strong in us that everybody will need to do some work if he is to be contented. We shall do more things for ourselves than is usual with the rich to-day, only too glad to have small duties and tasks and routines. But beyond this, we shall endeavor to spread the bread thin on the butter – to make what work there is still to be done to be as widely shared as possible. Three-hour shifts or a fifteen-hour week may put off the problem for a great while. For three hours a day is quite enough to satisfy the old Adam in most of us!”

If you’re a hard-driving, competitive person who logs well over 40 hours of work each week in pursuit of higher earnings, plum promotions, and peer respect, Keynes’ predictions may be mystifying, not to mention unrealized.

While it’s true that Keynes’ expectations for the future haven’t panned out (he also anticipated accumulation of wealth would lose social importance resulting in a changed moral code), the average work week did get shorter in many developed countries between 1990 and 2012. It’s interesting to note, as The Economist pointed out, more productive and better-paid workers often put in less time at the office. The publication offered this example:

“The Greeks are some of the most hardworking in the OECD (Organization for Economic Cooperation and Development), putting in over 2,000 hours a year on average. Germans, on the other hand, are comparative slackers, working about 1,400 hours each year. But German productivity is about 70% higher.”

When it comes to hours worked, America is an aberration relative to other developed nations. We’re highly productive and we tend to work longer hours.

Weekly Focus – Think About It

“I do not want to foresee the future. I am concerned with taking care of the present. God has given me no control over the moment following.”

—Mahatma Gandhi, a leader of India’s independence movement