Forty years seem like a long time.
This is the final post of 3-part series exploring the last four decades. We have arrived to discuss last year. The last two weeks we published 2 posts covering these 4 years – Review of Years: 1975 & 1985 and Review of Years: 1995 & 2005 – in the context of how we have evolved over the last 30 years.
In this post, we discuss the incredible developments with regards to the growth of the world’s population and the tremendous improvement of people’s lives around the world over the last decade. In addition, we explore how these developments have positively impacted the large companies in the private sector.
World events from 2015 – A radical Islamic faction, ISIS, cast the Middle East into chaos and carries out terrorist atrocities in San Bernardino, California and Paris. Refugees pour into Europe. The world’s leading nations reach an accord with Iran on its nuclear development program.
Yogi Berra dies. U.S. Congress lifts 40 year ban on oil exports. Adele releases her 3rd album “25” debuting at number one in more than 25 markets. A postage stamp costs 49 cents.
Global population: 7.29 billion, less than one in ten of whom live in extreme poverty.
U.S. Population: 322 million
U.S. real GDP: $16.42 trillion (as of Sept 30, 2015)
S&P 500 year-end close: 2,044
S&P Earnings: $117
S&P Dividends: $42 (as of Sept 30, 2015)
Over these last 40 years (from 1975 – 2015), global population is up nearly 80% while at the same time extreme poverty has been reduced from one human in two to 1 in ten. This population growth has occurred while millions have moved into the middle class creating a new wave of consumers.
Our own country’s population has grown nearly 50% as we have gained a new person every 14 seconds through new births and migration. Even with this growth, the vast size of the United States is apparent in our “population density per square mile”. On that matrix, the United States has 85 people per square mile compared to almost 300 in France, 590 in Germany, 680 in the UK and 870 in Japan.
While this population growth continued, the real gross domestic product of the United States has tripled while the US population only grew 50% which indicates that the real GDP per capita has soared.
Where has this increased productivity been shown? In the earnings shown by the great U.S. companies as represented by the S&P 500. The S&P 500 index rose more than 20 times, on an earnings increase in excess of 15 times and on a dividend boost approaching 12 times.
And while this stock market growth was impressive, it is more so when compared against the increases in the general cost-of-living. During these four decades the general level of consumer prices increased just over 4 ½ times.
These impressive gains were the result of the spread of the free market and free enterprise being unleashed around the world at the expense of communism and the extreme iterations of socialism during this time. In addition, the incredible strides made with information technology generated incredible advances in productivity which have led companies to continue to spend money on research and development and increase their reach and profitability.
As long as these advances continue, investors should expect the next four decades to have similar results.
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