Brian's 50th Birthday

Published January 2021

 
This November 28th will mark the 50th birthday of my life and there is so much to be thankful for. To commemorate this occasion, here are with some random thoughts from my financial advisor perspective…

• In my lifetime, there have been seven economic recessions. Just to prove that sometimes the stock market will decline in value even when the economy is doing fine, there have been 11 drops in the S&P 500 index of 20% or greater, an average of one every five years or so. In other words, the world appeared to be ending only to prove that it was temporary.

• Investing in individual companies is hard. So many companies have gone from boom to bust, Lehman Brothers, Worldcom, GM, Chrysler, Enron, Pier 1, Borders, Blockbuster just to name a few. About 36% of businesses make it to their 10th birthday, and about 21% make it to their 20th anniversary, according to the U.S. Bureau of Labor Statistics.

• The top 10 companies in 1971 on the Fortune 500 list are barely on investment watch lists today. To illustrate how much times change, the full list - ranked by 1971 revenue: GM, Exxon, Ford, GE, IBM, Mobil, Chrysler, ITT, Texaco, and AT&T. As a reminder, two of the companies listed went bankrupt – GM and Chrysler. The rest have not even had HALF the performance of the S&P 500. This makes me wonder how our current top 10 companies will fare over the coming years.

• World population has gone from 3.7 billion to over 7.7 billion. In 1971, half of the global population lived in extreme poverty. Today, it is less than 10%.

• The growth of the middle class has been rocketing. Looking into the future, the Brookings Institution, as shown in J.P. Morgan Capital Charts, projects that one billion six hundred million people, or nearly five times the U.S. population, will be pulled up into the middle class between 2020 and 2030. This would appear to have remarkably worthwhile implications for the Great Companies in America and the World.

• The S&P 500 index closed on November 29th 1971 at 93.41. As I write today, it is 4,697.96. This is an average yearly return of 11.28%.

• Possibly, the most underappreciated phenomenon in investing is the soaring dividend of the S&P 500. In 1971, the dividend of the S&P 500 index was $3.16. It is now $56.40 – better than a 5% increase per year in income to shareholders.

• Inflation, as illustrated by the Consumers Price Index, has averaged 3.88% per year over the same block of time. Thus, the dividend income alone has outpaced the rate of inflation.

• Interesting enough, I share birthdays with a few extraordinary companies as well. Some of those businesses that were established in 1971 are Disney, PIMCO, Lucas Films, Fed Ex, Cuisinart and Starbucks.

• I believe there were plenty of amazing business accomplishments for those after the age of 50. Ray Kroc – McDonalds, Harland Sanders – KFC, Leo Goodwin – GEICO, Bernie Marcus - Home Depot, Martha Stewart was 49, and Ariana Huffington - Huffington post
My family and I wish you and yours a joyous, peaceful and soul-satisfying Thanksgiving.
Until next time,
Any company specifically mentioned is not a recommendation for purchase or sale of related securities.

• Matt Frederick and I had the wonderful opportunity to meet and hear from who we believe could possibly be the greatest #50 in football history, Chicago Bears linebacker, Mike Singletary.


https://www.thebalance.com/the-history-of-recessions-in-the-united-states-3306011
https://www.visualcapitalist.com/the-20-biggest-bankruptcies-in-u-s-history/
https://www.bls.gov/bdm/entrepreneurship/entrepreneurship.htm
https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/
https://www.ranker.com/list/companies-founded-in-1971/reference__;!!F9svGWnIaVPGSwU!_UQO2vcRWeTznRrDqKTTcpUMcoea0x_66kDPSIwCYVd5lI8fxgij-DneI996qHQZFpqgIxRC9Kg$
https://www.businessinsider.com/companies-started-middle-aged-50s-60s#bernie-marcus-opened-the-first-home-depot-with-his-business-partner-at-50-4
World and U.S. population growth: U.S. Census Bureau, United Nations
U.S. real GDP per capita: Bureau of Economic Analysis, U.S. Census Bureau
S&P 500 : “S&P Earnings History,” NYU Stern School of Business
Percentage of world population in extreme poverty: World Bank “Poverty Headcount Ratio.”
Consumer Price Index: Bureau of Labor Statistics
Wells Fargo Hypothetical Report CPI since 11/30/1971 to 10/31/2021
Morningstar Hypothetical Report Top 10 since 11/30/1971 to 10/31/2021
Wells Fargo Hypothetical Report S&P 500 total return since 11/30/1971 to 10/31/2021
This material has been created for informational purposes only and is not a solicitation or an offer to buy any security or instrument or participate in any planning or trading strategy. All expressions of opinion reflect the judgement of the author at the time of writing, are subject to change without notice and are not necessarily those of Wells Fargo Advisors or its affiliates. Statistical information has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed.
Investing involves risk including the possible loss of principal. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. Diversification does not guarantee profit or protect against loss in declining markets. Since each person’s situation is different, you should review your specific investment objectives, time horizon, risk tolerance and liquidity needs with your financial professional before selecting an appropriate savings or investment strategy. Past performance is not a guarantee of future results.