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75 Years of How Americans Spend Their Money

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75 Years of How Americans Spend Their Money

75 Years of How Americans Spend Their Money

Consumers are the foundation of the U.S. economy, and how they choose to spend their money is a telling indicator of the overall American economic story.

The above chart from HowMuch.net, a cost information site, plots data from the Bureau of Labor Statistics (BLS) for 12 different consumer categories over a period of nearly 75 years to show the changing way in which Americans spend their money.

The data reflects median spending, and is adjusted for inflation.

Back in the Day…

One of the most interesting things about this chart is the data from 1941. What did Americans spend their money on before entering WWII, and how does that contrast with today?

Interestingly, in 1941, more money was spent on food than anything else. That year, the cost of putting food on the table averaged $8,311, coinciding with a time when nearly 15% of the workforce was working in agriculture. Today, farming is obviously much more technologically advanced, and food is also grown cheaply in other countries for consumption in America.

Food is now only the third-most important spending category for Americans at $6,759 per year, and only 1.6% of Americans now work agriculture, according to the World Bank.

Housing has also changed dramatically over time. While it has always been a key component of spending, shelter was actually cheaper ($7,537 per year) than putting food on the table in 1941. Since then, rents and house prices have risen substantially, and Americans now spend $17,798 per year on housing. This makes it by far the largest expenditure, on average, for each person.

Trending Up, Trending Down

Over the years, cost reductions can be seen the most in both clothing and food categories, which have benefited from new technologies and cheap labor in other countries.

Meanwhile, significant increases in spending can be found in healthcare, education, and transportation categories.

Healthcare spending in the U.S. is a global outlier (and not in a good way), and we previously noted that textbook and tuition costs have increased 207% and 197% respectively since 1996.

Lastly, the trend for money spent on transportation appears to reflect the cost of oil, which hit its highest points in the early 1980s and late 2000s. The most recent year of data from 2014 shows a notable decrease in transportation costs, which likely reflects the collapse in oil prices that occurred in mid-2014.

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Sustainable Investing: Debunking 5 Common Myths

Do sustainable strategies underperform conventional ones? This infographic shines a light on the realities of sustainable investing and the ESG framework.

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sustainable investing

Sustainable Investing: Debunking 5 Common Myths

It began as a niche desire. Originally, sustainable investing was confined to a subset of investors who wanted their investments to match their values. In recent years, the strategy has grown dramatically: sustainable assets totaled $12 trillion in 2018.

This represents a 38% increase over 2016, with many investors now considering environmental, social, and governance (ESG) factors alongside traditional financial analysis.

Despite the strategy’s growth, lingering misconceptions remain. In today’s infographic from New York Life Investments, we address the five key myths of sustainable investing and shine a light on the realities.

1. Performance

MythReality
Sustainable strategies underperform conventional strategiesSustainable strategies historically match or outperform conventional strategies

In 2015, academics analyzed more than 2,000 studies—and found that in roughly 90% of the studies, companies with strong ESG profiles had equal or better financial performance than their non-ESG counterparts.

A recent ranking of the 100 most sustainable corporations found similar results. Between February 2005 and August 2018, the Global 100 Index made a net investment return of 127.35%, compared to 118.27% for the MSCI All Country World Index (ACWI).

The Global 100 companies show that doing what is good for the world can also be good for financial performance.

Toby Heaps, CEO of Corporate Knights

2. Approach

MythReality
Sustainable investing only involves screening out “sin” stocksPositive approaches that integrate sustainability factors are gaining traction

In modern investing, exclusionary or “screens-based” approaches do play a large role—and tend to avoid stocks or bonds of companies in the following “sin” categories:

  • Alcohol
  • Tobacco
  • Firearms
  • Casinos

However, investment managers are increasingly taking an inclusive approach to sustainability, integrating ESG factors throughout the investment process. ESG integration strategies now total $17.5 trillion in global assets, a 69% increase over the past two years.

3. Longevity

MythReality
Sustainable investing is a passing fadSustainable investing has been around for decades and continues to grow

Over the past decade, sustainable strategies have shown both strong AUM growth and positive asset flows. ESG funds attracted record net flows of nearly $5.5 billion in 2018 despite unfavorable market conditions, and continue to demonstrate strong growth in 2019.

Not only that, the number of sustainable offerings has increased as well. In 2018, Morningstar recognized 351 sustainable funds—a 50% increase over the prior year.

4. Interest

MythReality
Interest in sustainable investing is mostly confined to millennials and womenThere is widespread interest in sustainable strategies, with institutional investors leading the way

Millennials are more likely to factor in sustainability concerns than previous generations. However, institutional investors have adopted sustainable investments more than any other group—accounting for nearly 75% of the managed assets that follow an ESG approach.

In addition, over half of surveyed consumers are “values-driven”, having taken one or more of the following actions with sustainability in mind:

  • Boycotted a brand
  • Sold shares of a company
  • Changed the types of products they used

Women and men are almost equally likely to be motivated by sustainable values, and half of “values-driven” consumers are open to ESG investing.

5. Asset Classes

MythReality
Sustainable investing only works for equitiesSustainable strategies are offered across asset classes

This myth has a basis in history, but other asset classes are increasingly incorporating ESG analysis. For instance, 36% of today’s sustainable investments are in fixed income.

While the number of sustainable equity investments remained unchanged from 2017-2018, fixed-income and alternative assets showed remarkable growth over the same period.

Tapping into the Potential of Sustainable Investing

It’s clear that sustainable investing is not just a buzzword. Instead, this strategy is integral to many portfolios.

By staying informed, advisors and individual investors can take advantage of this growing strategy—and improve both their impact and return potential.

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Venture Capital Mega-Deals on Pace to Set New Record in 2019

With bigger deals and multi-billion dollar IPOs, venture capital financing is reaching new heights. This infographic explores the latest trends.

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The Rise of Mega-Deals in Venture Capital Financing

Venture capital “mega-deals”—which rake in $100 million or more—have taken off at breakneck speed. A total of 185 were signed by the end of September, setting the pace for a record number of mega-deals in 2019.

Interestingly, mega-deal counts aren’t the only thing ballooning in venture capital financing. Almost everything has gotten bigger: venture capital funds, deal sizes, and exit valuations.

Today’s infographic comes from Pitchbook’s quarterly Venture Monitor, and visualizes the trends shaping the U.S. venture capital landscape.

Fundraising

Venture capital fundraising remains robust, with $29.6 billion raised across 162 funds year-to-date. Not only that, a higher proportion of funds are quite large. Roughly 9% were sized $500 million or more, with 15 such mega-funds closed year-to-date.

What does it mean to “close” a fund? Before they can begin operations, a venture capital fund manager will raise money from investors. The fund closes to signify the end of a fundraising round and can go through multiple closings until it reaches its targeted fundraising amount.

Venture capital fundraising

In the coming years, fundraising will likely remain strong. Venture capital net cash flows have been positive since 2012, which means capital is being returned to the limited partners of a fund faster than they can reinvest it into new vehicles.

With this excess cash, investors will likely contribute to the next round of venture capital funds—continuing the virtuous cycle.

Dealmaking

Total deal value is set to surpass $100 billion for a second consecutive year, partly driven by the rise of mega-deals. At every stage of startup financing, average deal sizes remain elevated.

Venture capital deal sizes

While the focus has shifted to the massive amount of capital available at later stages, angel and seed-stage deals are still quite healthy, with an average deal size of over $2 million.

At late financing stages, the 2019 average deal size is nearly $35 million, second only to 2018’s record of $44 million. Companies continue to raise large sums of capital prior to going public, with 140 late-stage mega-deals completed in 2019.

Exits

Total exit value reached $200 billion for the first time in a decade. Interestingly, initial public offerings (IPOs) comprised a whopping 82% of overall exit value.

Multi-billion dollar IPOs continue to dominate headlines, with six such public debuts occurring in the third quarter.

CompanyIndustryPre-Money Valuation at IPOAmount Raised at IPO
DatadogNetwork Management Software$7.2B$648M
Peloton InteractiveRecreational Goods$6.9B$1.2B
CloudflareNetwork Management Software$3.9B$525M
10X GenomicsBiotechnology$3.3B$390M
MedalliaBusiness/Productivity Software$2.3B$326M
LivongoHealthcare Technology$2.2B$355M
Source: Pitchbook financial database

Notably missing from the list is WeWork. The company failed to go public due to profitability concerns, and anchor investor Softbank recently provided $9.5 billion in bailout financing in an attempt to rescue the company.

Sky High Valuations

As venture capital reaches new heights, analysts will be paying closer attention to each startup’s profitability potential.

“… new companies are shifting their focus to measured growth in an effort to prioritize long-term success and a more sustainable, scalable business model.”

Alex Song, CEO and Co-Founder of Innovation Department

With 2019 coming to a close, will fourth quarter venture capital activity be able to maintain its present momentum?

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