Current Topics In Financial Services Education

For those working in the finance industry, keeping up to date with current financial services education and current events are very important. Financial services training can help advisors learn about new areas of interest and keep up with the trends of the market. Relevant subjects such as healthcare are important to keep abreast of. This overview will go over some recent updates.

HEALTH CARE Healthcare is always a relevant topic for financial services training. Health care costs have risen at more than twice the pace of overall inflation since 1990, more than doubling their share of the economy during that period. Even adjusting for the size of its economy and population, the U.S. spends far more money on health care each year than any other country in the world. As of 2009, health care spending made up 15.3% of the U.S. economy compared to an average of 8.8% for developed countries.

Under current policies, government spending on health care is projected by the Congressional Budget Office to rise to more than 18% of GDP per year over the next 75 years; since WWII, the U.S. government has collected tax revenue to finance its entire budget that has equaled an average of 18% of GDP each year.

DJIA: OCTOBER 2008 TO OCTOBER 2009 As you may learn in a financial services education course, the DJIA is a large stock market index. It was created by Charles Dow in 1896.

The table below shows DJIA numbers from October 1st, 2008 through September 2009. Over this period, the Dow dropped from its peak of over 14,000 down to 10,000 (October 2008) to its March 2009 low and then back up to 10,000 for the first time (October 14, 2009) since dropping to 10,000 at the beginning of October 2008. The Losers figures show the percentage of DJIA stocks with a negative monthly return; P/E reflects the DJIA price/earnings (source: WSJ Market Data Group). The DJIA hit a closing-day low point (6,547) on March 9th, 2009.

CORRELATION COEFFICIENTS Another topic for financial services education is correlation coefficients. Correlation coefficients measure interdependence between two (or more) variables. In financial services training you may learn how to read these coefficients.

Over the long term, different asset categories tend to have predictable relationships (correlations). For example, U.S. Treasury prices usually move in the opposite direction of stocks because people buy Treasuries and sell stocks when they are worried about the economy and do the reverse as they get more optimistic. Over short periods of time, correlation coefficients can vary wildly.

For example, from the end of July 2009 to November 2009, the U.S. dollar index and S&P 500 were 60% inversely correlated (71% inverse correlation in October). However, between January 2007 and the end of July 2009, the correlation was just 2% (an almost perfect random correlation).

Over a recent 15-year period (1994-2008), the correlation between oil prices and the S&P 500 ranged from +20% to -20% (random correlation). At extremes, the correlation was +40% to -40%; in mid-June 2009, the correlation briefly hit +75%.

Healthcare, the Dow Jones Industrial Average (DJIA), and correlation coefficients are all topics of interest in financial services education. Financial services training may cover these topics in greater detail.