Its Always Something
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While our nation faces serious issues right now, there are compelling reasons to consider investing today. As the nation recovers from the Great Recession, something’s happening that should give investors hope.
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Its Always Something
- 2. Environmental Concerns Lack of Trust in Wall Street The Media’s Focus The Unemployment Nationalized on Bad News National Housing Healthcare Debt Slump
- 3. INNOVATION: Invention of the microprocessor, floppy 1975: disks, and gene splicing Highest Unemployment ECONOMY: Since the Great Inflation dropped from more than 12% in Depression 1974 to less than 5% by the end of 1976 Unemployment dropped from 8.5% in 1975 to 5.8% in 1979 “ Unemployment—or the fear of it—has become a gnawing preoccupation… millions of Americans would argue that the most severe slump since the 1930s has indeed become worse than a recession…[The jobless toll] will stay high for the foreseeable future, even long after the economy turns up. ” Data source: Thomson Reuters, 8/10. TIME magazine, March 17, 1975 PAST ECONOMIC AND INDEX PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Assumes reinvestment of income and no transaction costs or taxes. This data is for illustrative purposes only and not indicative of any investment. The S&P 500 Index is an unmanaged list of 500 widely held U.S. common stocks frequently used as a measure of U.S. stock market performance. Cash is represented by 30-day U.S. Treasury Bills. Indices are unmanaged, are not available for direct investment, and do not represent the performance of any of The Hartford’s products or any particular investment.
- 4. ECONOMY: U.S. economy entered a period of unusually 1983: strong growth, averaging 5.2% growth from Foreign Debt 1983 to 1986 Concerns about high levels of foreign debt Will Sink the moved to the sidelines Global Economy Large American companies began to sell more products and services overseas “ The global economy is sitting on a debt bomb. The risks, according to U.S. Federal Reserve Chairman Paul Volcker, are ‘without precedent in the postwar world.’ Says British Financier Lord Lever: ‘The banking system of the Western world is now dangerously overexposed. TIME magazine, January 10, 1983 ” Data source: Thomson Reuters, 8/10. PAST ECONOMIC AND INDEX PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Assumes reinvestment of income and no transaction costs or taxes. This data is for illustrative purposes only and not indicative of any investment. The S&P 500 Index is an unmanaged list of 500 widely held U.S. common stocks frequently used as a measure of U.S. stock market performance. Cash is represented by 30-day U.S. Treasury Bills. Indices are unmanaged, are not available for direct investment, and do not represent the performance of any of The Hartford’s products or any particular investment.
- 5. INNOVATION: Personal computers, the Windows 1984: operating system, and digital cell phones High Government First artificial heart transplant Spending Leads to Record Budget Deficits “ If Congress and the White House insist on avoiding...the difficult measures needed to control the deficit, the chance to keep the recovery going and assure the future health of the U.S. economy may slip irretrievably away. ” Data source: Thomson Reuters, 8/10. TIME magazine, March 5, 1984 PAST ECONOMIC AND INDEX PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Assumes reinvestment of income and no transaction costs or taxes. This data is for illustrative purposes only and not indicative of any investment. The S&P 500 Index is an unmanaged list of 500 widely held U.S. common stocks frequently used as a measure of U.S. stock market performance. Cash is represented by 30-day U.S. Treasury Bills. Indices are unmanaged, are not available for direct investment, and do not represent the performance of any of The Hartford’s products or any particular investment.
- 6. INNOVATION; Internet introduced to general public 1992: Technology boom created millions No Recovery of jobs, greatly increasing productivity in Sight ECONOMY: Low inflation, low interest rates, and moderate-to-strong growth led to “Goldilocks” “ economy In a normal rebound, Americans would be witnessing a flurry of hiring, new investment and lending, and buoyant growth. But the U.S. economy remains comatose a full year and a half after the recession ended. ” Data source: Thomson Reuters, 8/10. TIME magazine, September 28, 1992 PAST ECONOMIC AND INDEX PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Assumes reinvestment of income and no transaction costs or taxes. This data is for illustrative purposes only and not indicative of any investment. The S&P 500 Index is an unmanaged list of 500 widely held U.S. common stocks frequently used as a measure of U.S. stock market performance. Cash is represented by 30-day U.S. Treasury Bills. Indices are unmanaged, are not available for direct investment, and do not represent the performance of any of The Hartford’s products or any particular investment.
- 7. Emerging Markets: Technology for Emerging Wealth a Greener and Wireless World Middle-class consumers span U.S. auto makers challenged to a dozen emerging nations, and sell one million plug-in hybrids, they include almost 2 billion and proposed tax concession for people who spend a total of those who buy them3 $6.9 trillion annually1 Shift to “cloud computing,” is becoming more popular4 Companies in the S&P 500 Index reported that 46.6% of By 2030, developing nations will their sales came from overseas2 own more than 90% of all mobile phones worldwide5 1 “Capturing The World’s Emerging Middle Class,” McKinsey Quarterly, July 22, 2010. 3 “Crisis Bodes Well For Electric Cars,” Forbes, February 10, 2009. 2 Standard & Poor’s Research & Design Report, August 2010. 4 “Cloud Computing’s Great Promise,” Forbes, June 30, 2010. 5 “The Scary New Rich,” Newsweek, March 6, 2010. PAST ECONOMIC AND INDEX PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. The S&P 500 Index is an unmanaged list of 500 widely held U.S. common stocks frequently used as a measure of U.S. stock market performance. It does not represent the performance of a specific fund and is not available for direct investment.
- 8. Healthcare: Expect the Increased Innovation Unexpected and Demand Dr. Leroy Hood, who played key role Over the next 10 years, new in decoding the human genome, is products and innovations will working to make “P4 medicine”— surprise and delight us. personalized, predictive, preventive, and participatory—a reality.1 We can’t know in advance what they’ll be, but It’s always The average American spends something. $7,000 per year on healthcare, while the average person in China spends By investing in a diversified portfolio, just $150, leaving room for growth in you can potentially profit from the healthcare spending.2 growth new trends may bring. 1 “A Vision for Personalized Medicine,” TechnologyReview.com, March 9, 2010. 2 “US Reform and the Investment Case for Health Care,” Wellington Management white paper, May 2010.
- 9. Perspective 1: After Periods of Decline, the Market Has Always Recovered Dow Jones Rolling 10-Year Average Annual Returns (12/31/1910–12/31/2011) What’s Next? What’s Next? Although the future is Although the future is uncertain, based on uncertain, based on this graph, would you this graph, would you rather invest when the rather invest when the market has already market has already had a strong 10-year had a strong 10-year run, or after the run, or after the market has had a market has had a dismal decade? dismal decade? INDEX PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Assumes reinvestment of income and no transaction costs or taxes. This data is for illustrative purposes only and not indicative of any investment. Indices are unmanaged, are not available for direct investment, and do not represent the performance of any of The Hartford’s products or any particular investment. The Dow Jones Industrial Average (DJIA) is an unmanaged price weighed index of 30 of the largest, most widely held stocks traded on the NYSE. Data Source: Ned Davis Research, 2/12.
- 10. Perspective 2: Diversify Globally to Capture Global Opportunities Major Equity Indices From Several Countries and Regions Calendar-Year Total Returns (2006-2011) 1 Brazil is represented by the MSCI Brazil USD Index, a free- float adjusted market-capitalization index that is designed to measure the equity performance of the Brazilian market. 2 The European Union is represented by the MSCI Europe Index, a free float-adjusted market capitalization weighted index designed to measure the equity market performance of the developed markets in Europe: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. 3 Japan is represented by the MSCI Japan Index, a free float adjusted market capitalization index designed to measure large and mid cap Japanese equity market performance. 4 United States is represented by the S&P 500 Index, which is a composite of the 500 largest companies in the United States. 5 Russian Federation is represented by the MSCI Russia USD Index, a free-float adjusted market-capitalization index that is designed to measure the equity performance of the Russian market. 6 China is represented by the MSCI China USD Index, a free-float adjusted market-capitalization index that is designed to measure equity market performance in China. INDEX PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Indices are unmanaged, are not available for direct investment, and do not represent the performance of any of The Hartford’s products or any particular investment. Data Source: Morningstar, Inc., 2/12.
- 11. Perspective 3: Remember, Innovation Can Drive Markets Growth of $1 Invested (12/31/81–12/31/11) $26 $23 $23 $22 $18 $13 $4 $4 $2 12/31/1981 1985 1990 1995 2000 2005 2011 Hypothetical value of $1 invested at year-end 1981 Assumes reinvestment of income and no transaction costs or taxes. This data is for illustrative purposes only and not indicative of any investment. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. BECAUSE OF ONGOING MARKET VOLATILITY, PERFORMANCE MAY BE SUBJECT TO SUBSTANTIAL CHANGES. Government bonds and Treasury bills are guaranteed by the full faith and credit of the U.S. government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than the other asset classes. Furthermore, small stocks are more volatile than large stocks, are subject to significant price fluctuations and business risks, and are thinly traded. Small stocks are represented by the fifth capitalization quintile of stocks on the NYSE for 1926–1981 and the performance of the Dimensional Fund Advisors, Inc. (DFA) U.S. Micro Cap Portfolio thereafter. Large stocks are represented by the Standard & Poor’s 500 ®, which is an unmanaged group of securities and considered to be representative of the stock market in general. Government bonds are represented by the 20-year U.S. government bond, Treasury bills by the 30-day U.S. Treasury bill, and inflation by the Consumer Price Index. The Consumer Price Index (CPI) is the most common measure of inflation for urban consumers; it records the increase in the rate of inflation by relating the cost of a basket of goods and services today to a base period. Gold is represented by the S&P GSCI Gold Index, a sub-index of the S&P GSCI, which tracks the COMEX gold future. Indices are unmanaged and unavailable for direct investment. Data Source: Morningstar, 1/12. Sources for Inventions: About.com and ThePeopleHistory.com, 9/10.
- 12. 1 After Periods of Decline, the Market Has Always Recovered 2 Diversify Globally to Capture Global Opportunities 3 Remember, Innovation Can Drive Markets
- 13. This information is written in connection with the promotion or marketing of the matter(s) addressed in this material. The information cannot be used or relied upon for the purpose of avoiding IRS penalties. These materials are not intended to provide tax, accounting or legal advice. As with all matters of a tax or legal nature, you should consult your own tax or legal counsel for advice. “The Hartford” is the Hartford Financial Services Group, Inc. and its subsidiaries, including the issuing companies of Hartford Life Insurance Company and Hartford Life and Annuity Insurance Company. All information and representations herein are as of 12/11 unless otherwise noted. This seminar has been funded in whole or in part by Hartford Life Distributors, LLC, a broker dealer affiliate of The Hartford. SEM_IAS 102089 2/12
Editor's Notes
- Good [morning/afternoon/evening]. My name is [Name] and I’m a [title] for [The Hartford]. While our nation faces serious issues right now, there are compelling reasons to consider investing today. As the nation recovers from the Great Recession, something’s happening that should give investors hope. We’ve all heard the reasons not to invest today. I’d like to help you put those concerns into perspective, and show you some things happening today that may be good for investors.
- Every day, it seems there’s something going on in the economy that may lead you to believe it’s just not the right time to invest. Today’s worries are easy to identify—and we’re all thinking about them: High unemployment High government spending leading to record budget deficits A lost decade for stocks and limited access to credit Fears that high levels of foreign debt could sink the global economy The worst recession since the Great Depression and a weak recovery Deflation or inflation But are these worries really unprecedented? And what could you miss if you focus only on the negative news of the day? Are there not-so-obvious opportunities out there, beyond our backyard? The surprising truth is that when it comes to reasons not to invest: It’s always something . But when it comes to reasons to get excited about investing: It’s always something .
- While today’s economic difficulties may seem “unprecedented,” past generations have faced similar difficulties. Those who expected the difficulties of the moment to last forever missed out on larger trends that would eventually help drive the economy and stock market to new heights. Let’s take a look at a few of them, starting with 1975. [Review slide.] By focusing on high unemployment, you may have missed the many advances in technology throughout the 1970s that laid the groundwork for the next three decades. Breakthroughs included the invention of the microprocessor, floppy disks, and gene splicing. Looking at the economy, inflation dropped from more than 12% in 1974 to less than 5% by the end of 1976, and unemployment dropped from 8.5% in 1975 to 5.8% in 1979.
- [Review slide.] The U.S. economy was about to enter a period of unusually strong growth, averaging 5.2% growth from 1983 to 1986 (growth above 3% is considered strong). This pushed concerns about high levels of foreign debt to the sidelines. Meanwhile, large American companies were beginning to sell more of their products and services overseas, laying the groundwork for today’s multinational companies.
- [Review slide.] In 1984, large deficits were due in part to large increases in defense spending during the Cold War—a war that would soon be over. Meanwhile, personal computers, the Windows operating system, and digital cell phones were about to increase productivity in businesses across the world, and the first artificial heart transplant would bring major advances to medicine.
- [Review slide.] In this 10-year period, the Internet was becoming available to the general public, and it would revolutionize everything. The resulting technology boom created millions of new, high-paying jobs, and greatly increased productivity. The combination of low inflation, low interest rates, and moderate-to-strong economic growth led to the “Goldilocks” economy that created one of the longest periods of economic growth in the nation’s history.
- Trends are usually obvious in hindsight, but not always so obvious at the time they’re occurring. Sometimes they’re slow and steady, and other times they start with a boom. Let’s take a closer look at a variety of trends that may help shape the global economy over the coming decade—and may represent an opportunity for investors. We’ll start with emerging market trends. What’s happening in nations such as India, China, Brazil, Russia, Turkey, and Indonesia? In developing nations, 70 million people joined the middle class in 2009—an average of 191,780 people per day 1 —and their spending power will have a major impact on the global economy. The rapidly growing ranks of middle-class consumers span a dozen emerging nations, and they include almost 2 billion people who spend a total of $6.9 trillion annually. A recent research study from McKinsey suggests that this figure will rise to $20 trillion during the next decade—nearly double the current consumption in the U.S. 2 Companies in the S&P 500 Index reported that 46.6% of their sales came from overseas 3 —a trend that will likely continue as emerging market nations continue to grow more prosperous. [Click] Technology will continue to touch every area of our lives. Growing demand in automobile and information technology in particular may give rise to widespread innovation in the technology sector. The U.S. government has challenged auto makers to design and sell one million plug-in hybrids capable of 150 miles per gallon by 2015, and proposed a $7,000 tax concession for Americans who purchase them. 4 As developed nations like ours go wireless, bandwidth to manage the flow of information is becoming increasingly scarce and valuable. As the trend continues, “wireless carriers could use the scarcity to profit.” 5 The shift to Internet-based computer applications, email, and data storage, known as “cloud computing,” is becoming more popular. This trend lowers costs for businesses and consumers, allows people to access information anywhere and anytime, and enables more efficient, secure communication—improving how we live and work. 6 Developing nations are becoming tech-savvy and tech-hungry, too. By 2030, people in developing nations, led by India and China, will own more than 90% of all mobile phones worldwide. 1 1 “The Scary New Rich,” Newsweek , March 6, 2010. 2 “Capturing The World’s Emerging Middle Class,” McKinsey Quarterly , July 22, 2010. 3 Standard & Poor’s Research & Design Report, August 2010. 4 “Crisis Bodes Well For Electric Cars,” Forbes , February 10, 2009. 5 “Bandwidth Is the New Black Gold,” TIME magazine, March 11, 2010. 6 “Cloud Computing’s Great Promise,” Forbes , June 30, 2010.
- The decoding of the human genome will lead to many new discoveries that will treat and cure a wide range of diseases. 1 Dr. Leroy Hood, who played a key role in decoding the human genome, is working to make “P4 medicine”—which is personalized, predictive, preventive, and participatory—a reality. 1 Using P4 medicine, doctors will examine a patient’s genetic makeup, give a personalized diagnosis, predict which diseases the person will be susceptible to, use preventive medicine, and get patients to participate in staying healthy and avoiding risk factors. Let’s think about developing nations again—for example, China. The average American spends $7,000 per year on healthcare, while the average person in China spends just $150, leaving plenty of room for growth in healthcare spending. As more people enter the middle class around the world, they are likely to spend more money on healthcare products and services. 2 Then there’s the unexpected. [Click] Over the next 10 years, new products and innovations will surprise and delight us, making our lives more productive and our bodies healthier. While we can’t know in advance what they’ll be, we can be confident in this: It’s always something . By investing in a diversified portfolio of domestic and foreign stocks, you can potentially profit from the growth these trends may bring. 1 “A Vision for Personalized Medicine,” TechnologyReview.com, March 9, 2010. 2 “US Reform and the Investment Case for Health Care,” Wellington Management white paper, May 2010.
- Now that you can see some potential areas of opportunity, it’s time to see what we can learn from past investors. When we examine stock market history, a fascinating pattern emerges. This chart shows the returns for the Dow Jones Index over 10-year rolling periods. For example, the bar for 1910 shows a 4.9% return, which means that from 1900-1910, the index returned an average of 4.9% per year. Since 1910, whenever the stock market has had a 10-year period of poor returns (the time periods circled in red in the chart), it has usually rebounded strongly in the following 10-year period. [Review slide]
- Our second lesson from past investors is the concept of global diversification. While you may feel more comfortable owning U.S. stocks than foreign stocks, it may make sense to diversify your portfolio globally. As the chart shows, no single country’s stock market consistently outpaces markets in the rest of the world. Investing in both foreign and domestic stocks may help you reduce the risk in your portfolio through diversification, and may help you capitalize on products and services developed around the world.
- Finally, when you think of the investment future, it may be helpful to take a closer look at innovations and investments of the past. In the long term, how have innovations shaped our lives and our investments? How have certain investments performed compared to others? [Review slide] As we can see, investors in past decades who focused on short-term problems would have missed out on the long-term growth that stocks have historically provided. Owning a diversified portfolio of stocks may help you benefit from innovative products and services that will shape the future, and propel future markets. It’s always something .
- The next time you catch yourself reading negative news and thinking, “It’s always something!,” I would encourage you to try to see beyond the moment. Seeing beyond the moment means learning from the past, putting today’s issues in perspective, and preparing for the future. Remember these three important lessons for long-term investors. [Review slide] Your financial advisor can help review your long-term investment strategy and help position your portfolio to take advantage of future opportunities. Because when it comes to reasons to invest for the long-term, it’s always something. Thank you for your time and participation today.
- Read slide.