One For The Money

• Acknowledging 2022 [01:21]
• Advancements in the last century [03:52]
• The progress of human well-being [12:05]
• Earning more interest on savings [14:40]

If you read or watch the news, you would be forgiven for thinking that much is not right in the world. 2022 provided quite a bit of negative material. Investment returns were historically bad. Stocks faced the 7th worst loss since the 1920s, and particularly shocking was that the bond markets suffered too. Bonds historically have been a safe haven, with only four previous down years in the last forty-six that were down less than 3%. But in 2022, the bond market was down 13%. 2022 was the third worst year ever for a stock/bond portfolio.

2022’s stock and bond performance, coupled with the forecast for the year ahead, can make us feel less optimistic about the future. However, the narrow focus on the last and current year can cause us to forget about the unmistakable and remarkable progress humanity has made and will continue to make. 

In the past 20 years, global poverty rates have been reduced by 50%. A hundred years ago, three-quarters of the world’s population lived in extreme poverty; today, that number is less than 10%. Just 24% of people had modern sanitation, but now 70% of the world does. Murders are down roughly 17% over the last 25 years or so. The number of deaths due to wars and genocide is also down dramatically. Today, child mortality is at the lowest it has ever been. Human life expectancy has doubled over the past century from 36 years in 1920 to more than 72 years today. 

Even the environment has had many improvements in the last century. In 1920, the deadliest environmental problem, pollution, was four times more likely to kill you in 1920 than today. In the 1920s, half a million people were killed by weather disasters, whereas the death toll in the last decade averaged 18,000. A decade ago, environmentalists declared that Australia’s Great Barrier Reef was nearly dead, killed by bleaching caused by warming ocean temperatures. This year, scientists revealed that two-thirds of the Great Barrier Reef shows the highest coral cover since records began in 1985.

Big banks still pay nearly nothing on savings, but their customers aren’t moving much of that money to higher-yielding alternatives. As a result, Americans are missing out on billions of dollars in interest. The Federal Reserve has raised interest rates to their highest level since early 2008, yet the most prominent commercial banks still pay peanuts to savers. In theory, savers could have earned $42 billion more in interest in the third quarter of 2022 had they moved their money out of the five largest U.S. banks and deposited it into the five highest-yielding savings accounts.

Those five big banks, Bank of America, Citigroup, JP Morgan, US Bank, and Wells Fargo, paid an average of 0.4% interest on consumer deposits in savings and money market accounts during this most recent quarter. The five highest-yielding savings accounts paid an average of 2.14% during the same period, according to data from bankrate.com. The five banks collectively hold about half the money kept at U.S. commercial banks.

Why haven’t savers moved their money? Some customers aren’t aware of how much money could be made by switching. That’s been the case for several clients to whom I’ve made this recommendation. Others think the switch is difficult, though it can be done in less than thirty minutes. Others don’t want to be bothered. You can’t blame the banks if they can maintain customers without paying for them. I recommend you look at what you’re earning at your current bank, find out what the online banks are offering, and consider transferring some to an online account.

Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

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• Is humanity doomed? Five ways the world is actually doing better – in data | Euronews
• The world has made spectacular progress in every measure of well-being. So why does almost no one know about it?
• 2022 Was One of the Worst Years Ever For Markets
• The World Really Is Getting Better - The Atlantic
• The $42 Billion Question: Why Aren’t Americans Ditching Big Banks? - WSJ