Craig Robson, Founding Principal and Managing Director
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Last week I read an article in the Wall Street Journal which caught my attention. It referenced that 18 months into the pandemic, the IQ scores of 700 children, from newborns up to age 3, fell to an average of 80 from 100 compared to previous years the tests had been taken, which I found concerning. In that same article a doctor, who is the director of MRI research at Rhode Island Hospital and a professor at Brown University, was quoted as attributing the declines to less social interaction during Covid which he feels is critical for brain development 1. I recall the lack of "social circuitry" I experienced in the spring/early summer of 2020 during the pandemic, and while I am hopeful my cognitive skills did not decline over this brief period of hibernation, I was glad to come back to our Regent Peak offices to re-engage with my team members as well as our clients. The opportunity to communicate in person with individuals outside of my immediate family is something I find fulfilling and this doctor's observations regarding the connection between social stimulation and cognitive skills certainly resonated with me.
From an economic perspective we are also experiencing data points which are concerning. The August jobs report was recently released and while the headline number of non-farm payrolls increased by 315,000 (slightly higher than the consensus), the underlying numbers are disappointing and bear watching closely. A few noteworthy points, highlighted by Charles Schwab Asset Management’s report on September 6, 2022 2 include:
Downward revisions of 107,000 jobs for the previous 2 months, which is historically not common if we are experiencing strong job growth
Full time jobs fell 242,000 in August, the third straight monthly decline (totaling 465,000 over that timeframe)
Initial jobless claims are up over 40% (using a 4-week average) from their recent trough in April. Using historical data, the average increase from a pre-recession trough to the start of a recession is just 20%
In addition to these unsettling employment statistics, we also know this has been a very challenging year for most asset classes. What feels like a reinforcing loop of volatility and negative returns are the capital markets cues that we are still in for some economic headwinds.
To my previous comments regarding cognitive growth, earlier this summer I had the opportunity to complete an entrepreneurial leadership program at MIT in Cambridge, MA which I had started in January of this year. The intellectual and social exchanges I experienced during that week were invigorating and culminated into new professional skill sets as well as friendships that have been impactful to me. While I was studying in Cambridge I also learned MIT's motto, "Mens et Manus", the Latin phrase of Mind and Hand. This phrase resonated with me as I am a proponent of "testing and learning" before rolling out larger initiatives and one I encourage everyone to employ, whether it be personal, financial or professional initiatives. And as such, during these periods of stress testing, we continue to encourage every investor to monitor plan design and portfolios and to use this period of volatility as a time to learn what feels most appropriate for your appetite for risk.
As schools across the nation have commenced again this fall, I'll close out this latest Craig’s Corner with a quote from Albert Einstein, one of the greatest physicists of all time. “Intellectual growth should commence at birth and cease only at death.”
Founding Principal and Managing Director