Hi. I'm Joan Solotar, Director of External Relations and Strategy at Blackstone. Thanks for joining us today for the Blackstone webcast, Better Second Half or Not, featuring Byron Wien, Vice Chairman, Blackstone Advisory Partners. Following Byron's formal comments, there'll be an opportunity for you to ask questions. If you look at the lower left-hand corner of your screen, you'll see a Q&A box. Feel free to click on that at any point to submit your questions anytime during the webcast. At the bottom of the console, you'll see a series of widgets. This interactive feature allows you to access additional functions by scrolling over them, such as downloading the slides and referring a friend. We plan to keep the webcast to 60 minutes, including Q&A. At the end of the PowerPoint, you'll see a full list of disclosures.
Thanks for joining us. With that, I'll turn it over to Byron Wien.
Thanks, Joan. Well, this is going to be a very controversial call because I'm taking a firm positive position on the remainder of the year. The title of it is Better Second Half or Not. I'm saying it is going to be a better second half. I would say the consensus out there is either very uncertain or on the negative side of it. The market hasn't done much so far this year. The earnings outlook is not very positive. As a result of that, investors are very cautious. They're probably not cautious enough yet, and they'll probably get a little more cautious. I view that favorably. The more cautious they are, the better the platform is for a better second half. Let's look at the key points that we're going to make. In the first one, the U.S.
economy is going to have a better second half. I definitely think things are in place. Initial unemployment claims are at a 40-year low. Monetary policy is easing in Europe. Europe is getting better and the Greek crisis is behind them. Abenomics is working in Japan. I'm optimistic that both Europe and Japan will have about 1% growth. China is slowing. I don't think they're really growing at 7%. They are not going to have a hard landing in spite of what the stock market has said. The stock market was up 150%. The fact that it's corrected a third of that is not a big deal. Most of the people who were hurt by that were speculators. I think the Fed will tighten in September or December. I don't think that that's a major factor.
A lot of people are worried about that because you shouldn't fight the Fed. My view is that even if they do tighten, they're not going to tighten much. They may raise rates 25 or 50 basis points, and they may do that every couple of meetings or so, but they're not going to do it every meeting. The long-term average of Fed funds is about 3.75%, and they're a long way from that, and it's going to take a long time to get to that. I think the S&P 500 will rise 10% for the full year, and that would mean a lot of work would be done in the second half. I think intermediate long-term yields are going to rise somewhat, but not a lot. I think the interest rate background is going to remain favorable for equities.
I think average hourly earnings are going to be increasing. There's going to be more money in workers' pockets, but I don't think inflation is going to be a problem. I think it's a generally favorable environment. Earnings for 2015 are probably going to be flat with 2014. For the market to rise, you're going to need a little help from multiples, but the stock market is just a little bit above the long-term average, a long way from bubble territory. Although I know there are some observers out there who are screaming that the market is in a bubble. Probably the most important thing I'm going to say today is that there's no recession in sight. Traditionally, the stock market peaks in anticipation of a recession. Non-farm payrolls are accelerating. They're starting to go up.
Labor share of GDP is low and just starting to pick up. Wage growth is improving, but it's still below the 4% trigger point. The yield curve is not inverted, and consumer confidence is in an uptrend. I can give you 20 things that usually appear before a recession begins, and none of them are in place. I'm not saying we're never going to have a recession, but I don't think we're going to have one this year, or next year, or maybe not even the year beyond it. We may go for a period of several more years before a recession. That's a good thing because if we do get into a recession, I don't know how we're going to get out of it. Usually, a recession is caused by the Fed raising interest rates to cure the excesses in the economy.
Bull markets, as you'll hear me say in a moment, bull markets die of excesses, according to a colleague of mine at Omega, Steve Einhorn. They don't die of old age. This one is a little long in the tooth, but the excesses have not appeared yet. When they do appear, the Fed usually does something like raise rates abruptly in order to cure it. Rates are low, and even if they start to go up later this year, they're not going to go up to a significant point. The Fed is praying that we don't have a recession. The Fed is praying that what I've said here about the lack of indicators indicating a recession is imminent. They hope that I'm right, because they don't have the tools to help the economy out. If we get into a recession, interest rates are already low.
They can't lower them further. We don't have the tools to cure a recession other than fiscal spending, and getting significant amounts of fiscal spending through a Republican Congress is going to be very difficult. Let's hope that this economy continues to grow for an indefinite period. Here's my radical asset allocation. I haven't changed it in the past quarter. 10% in large cap multinationals, most based in the U.S., 10% in other U.S. stocks, 5% in Europe, 5% in Japan, 5% in emerging markets, 15% in hedge funds, 10% in real estate and private equity, 35% in alternatives. Why so much in alternatives? Because I think you can get, in the case of private equity and real estate, returns of 10% or greater, and those are going to be hard to come by in the long-only conventional equity investments.
5% in gold has hurt me this year. I view that as a kind of protection, 5% in natural resources. I think oil will be headed higher in the second half of this year. I'll try to support that. 20% in the riskiest end of the credit curve. Mortgages, leveraged loans, and mezzanine financing. This chart is worth spending some time on. In the previous two webinars, I've talked about the fact that investor optimism was too positive. What you really need for a good bull market is for investors to be pessimistic, and we're getting there. The confusion caused by Iran, by Greece, has made investors cautious, and they're in the lower end of the neutral territory.
I think they'll get into pessimistic territory before they're done. That would be the perfect time to expand your investments, if I'm right and the market does better in the second half. You almost have to get investors to turn their mood negative in order to have the second half positive, as I have forecasted. This shows previous bull markets. They generally average 57 months and go up 165%. This one is already 74 months old, and up over 200%. You can say that it's been good enough to us. It's time for the market to do nothing or go down. As I said, the market usually anticipates a recession. There's no recession in sight, I think we have further to go, and I think you're going to see that in the second half.
Don't fight the Fed is an important mantra. Monetary policy has been an important driver of markets around the world, and it's worth spending some time on it. You could argue, and I would argue, that one of the reasons the U.S. market did as well as it did between 2009 and 2014 is that the Fed was putting $85 billion into the economy every month. In my judgment, and I'm yet to be challenged on this, three-quarters of that monetary stimulus went into the financial markets, pushing stocks higher and keeping interest rates low. The intent of the Fed was to stimulate the economy, but only one-quarter of that money went into the real economy, according to my analysis. During that time, the European Central Bank was actually reducing its balance sheet.
It had expanded its balance sheet during the crisis at the end of the last decade by guaranteeing loans if the various member banks bought the securities of the four troubled countries, Greece, Portugal, Spain, and Italy. As those loans were paid back, their balance sheet shrunk. Now we're in a position where the balance sheet of the European Central Bank is expanding and the balance sheet of the Federal Reserve is flattening, that's one of the reasons why the dollar has been strong relative to the euro, and I think that's going to continue. If Greece had dropped out of the European Union and the euro currency, then there was a possibility the euro would strengthen.
With Greece still in, the euro, in my judgment, is likely to be weak, maybe not a whole lot weaker than it already is, the dollar is going to be relatively strong against other currencies in the world, the euro and the yen primarily among them. I don't expect the Federal Reserve balance sheet to shrink. It's expanded from $1 trillion in 2008 to $4.5 trillion now. Some of the bonds that they have bought are going to roll off, I think they'll be replaced. I've had that opinion for the last six months, actually last nine months, I guess now, you can see that the Federal Reserve balance sheet has stayed flat. I made the statement a moment ago that this has had a lot to do with what the stock market did.
Just look over on the left where you see the U.S. The balance sheet went from $1 trillion to $4.5 trillion. The stock market tripled from $6 trillion to $19 trillion. Earnings more than doubled, that, at the same multiple, meant that $6 trillion of the $19 was accounted for by earnings improvement. That takes you from six to 12. You had $7 billion of appreciation in the U.S. market, I think $3.5 or $3 trillion of that was accounted for by monetary expansion. The expansion of the European Central Bank balance sheet just started. It's gone from EUR 2 trillion to EUR 2.4 trillion, the value of stocks in Europe has gone from eight to ten. In my judgment, the balance sheet expansion of the European Central Bank has played a role in the rise in the European stock market as well.
In the case of the Japanese stock market, the balance sheet of the Bank of Japan has expanded by more than the stock market has gone up, that's one of the reasons why I'm positive about Japan. I think the Japanese market has further to go. The transcendental point of these three charts is monetary policy has a lot to do with the appreciation in the equity markets in the three major markets of the world. I don't think that any of those three markets are going to become restrictive in terms of monetary policy. The U.S. may not be expansive, the multiple is such that it can accommodate a somewhat higher market. I'm not looking for a raging bull market, I am looking for the U.S. market, the European market, and the Japanese market to do somewhat better during the remainder of the year.
As far as the world GDP is concerned, I'm going to look at it a couple of ways, but we're in a period of relatively slow growth. I've got it here at less than 2%. I've said for a long time that the biggest problem the world has is that there's plenty of demand out there, but there are number of countries that are fulfilling that demand. In the 1940s, after World War II, when the United States was the principal manufacturer in the world, Europe and Asia had been devastated. The United States accounted for almost 50% of world GDP. It's down to 22% now, as you see in that box in the lower left. Other countries are producing quality goods at attractive prices. The middle class is expanding in the developing world, but there are plenty of manufacturers to satisfy the goods that they demand.
I think it's going to get better. Right now, if you take a composite of all the various people who are forecasting world growth, they've got it at less than 3% this year, but next year, it's going to pick up to 3.15. That's going to be accounted for largely by the developing world, notably China. China may not be growing at seven, but it's certainly growing at five. We've got 3% growth around the world, 2% in the U.S. The U.S. is going to grow faster than Europe or Japan. That should be enough to accommodate better equity markets. Here are some signs that things are getting better. Industrial production in Germany ticking up. The Japanese confidence is rising. I think we're going to have a better backdrop in both Germany and Japan.
There have been dark clouds over the market over the past several months, and I did want to make a few comments on each of them. It seemed to me that Greece was making the whole world markets nervous when the Syriza party won in February and Alexis Tsipras became the Prime Minister. He won on a platform of anti-austerity, and that was very popular in Greece. He kept on pursuing that, and it looked like Greece was going to drop out of the European Union and go back to the drachma or some alternative currency. Even he encouraged voters in the referendum that they had to vote no against the reforms that Europe was trying to impose on Greece. He did a total reversal. He turned around 180 and agreed to all the reforms. Why did he do that?
He did that because the Greek banks were closed. Greece did not have and was not going to get the money to pay pensions or public employees, including the military. The borders were going to become porous, and immigrants were going to flood over from Turkey and spread throughout the rest of Europe. He was probably facing the risk of personal assassination, because while the voters had supported him, the chaos that was going to result in Greece was going to be such that his life would have been in danger. He decided to give in to all the reforms that were being imposed on him. I think he made the right decision. Greece remains in the European Union. They're getting $96 billion in direct aid, EUR 84 billion-EUR 85 billion. They're selling $55 billion of assets, and they're okay for a while.
Don't think that Greece is out of the headlines. 3-6 months from now, they'll run out of money again, and they'll need another support, because I don't think they're going to have a positive GDP, and they're going to generate cash reserves where they can pay back some of their debt. I don't think they're going to have that anytime in the next year. They're scheduled to have 3.5% budget surplus in the next year, I think they're going to have a tough time with that. We have an agreement with Iran. I know it's controversial. There are probably some of you watching the webinar who are against it, who would have been in favor of escalating sanctions, I'm on the side that I think it isn't a great deal, it's a better deal than no deal.
If we didn't do the deal with Iran, they would have had a nuclear weapon in a couple of years. Now they probably won't have one for 10-15 years. I know that it's going to be hard to enforce the surveillance inspections. There are all kinds of problems associated with the deal, I think it's better than not having done it. I think there's some reason for optimism. Who wanted this deal more than anything else? The people of Iran wanted the deal because the 65% of that population is 35 years or younger. They didn't understand why the clerics and the leadership was pushing so hard to develop a nuclear weapon. Nobody who had a nuclear weapon has used it since 1945, including Pakistan, which is probably the country that would be most likely to use it.
They didn't understand why the country was suffering so much under the sanctions when, in fact, they weren't going to use the weapon in the first place. If the sanctions were lifted, Iran was in a position to ship more oil. The economy, which was going through a very difficult period, would do better, incomes would improve, jobs would be created. This is a young, educated population. They had so much to gain from doing the deal, I think it was the push from the bottom rather than the decision at the top that caused the deal to be done. It has to be monitored carefully, I think there are going to be problems with that, I'm glad it was put in place. Everybody's worried about China's stock market, predicting a hard landing there. Only 7% of the population participates in the stock market.
It's a very speculative arena. I call it a mainland Macau. My view is that the Chinese economy will continue to expand at least at a 5% rate. China will have a soft landing, not a hard landing. Finally, the U.S. economy is showing all the signs of improvement in the second half. These clouds which have hung over the market during the first six or seven months, I think are now going to be lifted, I think we'll see higher equity prices as a result. Let's take a look at some of the aspects of the economy. At the last webinar, I was very worried about the Economic Cycle Research Institute, which had turned down. Now, this is an indicator that had accurately predicted the slowdowns in the U.S. economy in 2010, 2011, and 2012, not in 2013, not in 2014.
It looked like it was predicting one in 2015, but now it's turned up, and I think that's a favorable sign. Earnings forecasts have been revised down. The number of estimates have been adjusted upward. Three months ago, it looked like second quarter earnings were going to be down 6%. Now it's down 3%. I think it'll probably turn out to be even better than that. Companies are actually guiding analysts more favorably. I think earnings are going to be flat for this year at about $120. The big problem that we have in the U.S. economy is with the middle 3 quintiles of income distribution. If you look at the real median family income, it has not gone back to where we were in 2007. The average family in the United States is not better off than it was before the recession.
Probably all of you who are on this webinar have a higher net worth than you had in 2007, but that's not true of the average American. That real median family income is still below where it was in 2007, and that's why the vast proportion of the population feels that it's not participated in the recovery. This is going to be a very important factor in the election, because the income inequality has widened during the recovery over the last six years, not diminished. The candidates that promise something to those that feel they haven't kept pace with the recovery in the economy are going to be in a better position to gain votes in the next presidential election. Wages are starting to go up, but they're only going up at about a 2.5% rate.
That's a modest increase, but a long way from the 4% that they're usually rising at the peak of the cycle. In terms of hours worked, that's up, and that's a favorable sign. We do have some average hourly earnings increase and increase in hours worked, and that's going to be good for consumer spending. The biggest problem the economy has is there are five million jobs open, and a lot of the people who are looking for jobs don't have the quantitative skills to fill them. People are applying for these jobs, but they're not being hired. They're still open. What we've got to do is retrain a number of the workers who have been displaced so that they're able to take these jobs. Here, there's a University of Michigan study that shows that a lot of people who have jobs are worried.
You can see that on the right-hand chart, side of the left-hand chart. They're worried about losing it in the next five years. I claim that half of all Americans go to bed scared every night. They either don't have a job, they don't have a job that pays all their bills, or they have a job, but they're worried about losing it. That chart on the left shows the support for that point. Either the company is going to get in trouble, or their particular segment of that company is in trouble, so they're worried about losing their job. That's going to affect consumer spending. On the other hand, jobless claims are down, so people are finding jobs, and the report that came out earlier today is indicative of that.
One of the biggest problems we have, I think this is an aberration in the recent figures, but I wanted to show it, labor compensation is improving. There was a sharp tick up recently. As a result of that, productivity has been down. This cycle has enjoyed increasing productivity throughout, That's how your standard of living rises. Standard of living goes up as productivity improves. For the last couple of quarters, we've had negative productivity, That means that the standard of living would be stagnant or declining. I don't think that this is a permanent phenomenon, but I did want to point it out. I don't think we have an alarming level of inflation. I think inflation is going to be around the 2% or 2%-3% level, but the recent numbers in both Europe and the U.S. have been above 3%.
I don't think inflation is worrisome yet, but it's something to keep your eye on. One of the favorable aspects of the U.S. economy is housing. This is probably the most important positive that's going to drive the second half. You see starts now over 1 million. In addition to that, you can see that the payroll employment in the 25-34-year-old age group, that's where household formations take place. That's been improving quite dramatically recently. I think housing is going to be the most favorable part of the U.S. economy. The part that needs to improve is capital spending. That's a problem both in the U.S. and in Europe. Capital spending isn't going up much in Europe. I think the Greek cloud has been a factor there. Capital spending has been improving in the U.S., Had a recent turn down.
The capital spending that's been done in the U.S. is to buy capital equipment that allows you to get the goods and services out the door with fewer workers. We haven't built a lot of new plants in the U.S. that would cause a sharp upturn in employment. You can see here that the reason for that is operating rates are below 80%. 80% is the trigger point where you start to build a new plant. We should be doing it because not only is American infrastructure aging, but the capital stock in American industrial plants is aging. It's older than it's ever been, 22 years. We really have to replace a lot of the equipment in our manufacturing plants. We have an infrastructure problem, not only in the public sector, but also in the private sector.
We should be improving capital spending throughout the economy. We haven't seen signs of it yet. It could be a terrific boost to the second half if it starts. One of the problems in capital spending is oil. Oil was an important component of capital spending. Today, July 23rd, is the one-year anniversary of the price of oil, the West Texas Intermediate, being $107. Nobody, including myself, when it was $107 said, "This is the top tick. Oil is going to be down 50%." I can't find anybody who said that, but it was down 50%. That has important implications for capital spending. This chart shows that it usually takes about 10 months from the peak in oil prices for capital spending to improve.
Now you're going to see the price of oil, except as a result of the Iran deal, it's taken a tick down, I don't think that the 1 million barrels out of 94 million barrels produced every day is going to be that big a factor. You should start to see some improvement in oil industry capital spending because it's been a year since the peak, and we went down very fast. You can see that the price of oil usually has a V-bottom. That's been the way it's been in the past cycles. It bottomed at 43, and it's headed up. It has had a minor correction, but I think it's going to head higher during the second half of the year. Oil is really related to world GDP growth.
When GDP growth stalled a little bit as a result of the turbulence over Greece and the Iran deal, I think that hurt the price of oil. Inventories were very high, as you see on the left side, and the rig count dropped to the point where oil should start to move up in price. I think there's still a lot of importing oil. China imports almost all of its consumption. The U.S., even we're a long way from self-sufficiency. We're still importing about 6 million barrels, about 25%-35% of what we consume every day. I think one of the areas of opportunity is energy segment high-yield bonds. There's still a good spread with treasuries. They still represent a significant portion of the total high-yield market. They're second only to technology. I think there are opportunities in both energy and technology, fixed income securities.
The biggest problem that we have in the economy is this. We're all enjoying the benefits of very high profit margins for American corporations. Profit margins are around 10%, and they've risen very sharply during this cycle. Unit labor costs haven't gone up at all. What's happened in this cycle is that corporations have benefited at the expense of labor. That's why you're hearing so much talk about raising the minimum wage because corporations have benefited at the expense of keeping wage rates flat. I think wages are going to start to move up, that may put a little pressure on profit margins, this is the reason why corporate profitability has improved so dramatically in this cycle. Here you see the consumer sentiment has improved quite dramatically. I think that's going to help consumer spending, we're not back to where we were in 2007.
Household net worth is at an all-time high, in my view, that has accrued primarily to those in the top quintile of income distribution. Those in the 3 middle quintiles have held their own, those in the bottom quintile have actually lost ground. The top quintile has a lower propensity to spend than the lower 4 quintiles, that's why you haven't really seen it in retail spending yet. If I'm right, wage rates are going up, the pace of the economy is going to improve, maybe you'll see some improvement in consumer spending. Attitudes seem to be improving, that's part of my reason for being optimistic about the second half. What you see here is that companies are willing to take out bank loans. Bank loans are back to where they were in 2007.
That shows that there's been a renewal of business confidence. Retail sales have been steadily rising, the last couple of readings have been negative, I think they'll resume their positive trend as we go through the rest of the year. Who has benefited from this recovery? Those who have stock holdings, because the stock market has tripled. Those that own expensive real estate, the high end of the real estate market has benefited. That's the top quintile that's improved their net worth. I'm hopeful that the benefits of the recovery are going to broaden out as we go through the remainder of the year. Just take a look at earnings. Analysts have been too high. Now, maybe they're too low. We've all learned that we shouldn't trust analyst estimates. Earnings have been very disappointing. The reason they've been disappointing is energy.
Here's revenues. Revenues are up if you take energy out, I show this for information purposes, obviously, energy is an important part of the overall economy. Revenues are up 8% if you dropped energy out, they're only up a small amount, 1%-2% if you keep energy in. The same is true of earnings. Earnings would be up 8% if you took energy out, they're only up marginally if you put energy in. I'm estimating that S&P earnings are going to be flat for the year at around 120. That obviously includes energy. If the price of oil starts to rise, even energy earnings should improve. I just wanted you to see that energy earnings are down 60% this year. I don't think they're going to stay there.
I think the price of oil is going to rise somewhat, not back to $107, I think we could see the price of oil rise to $70 or certainly $60-plus by year-end, that would help overall earnings. Here's a matrix which shows that if profit margins stay at around 10%, revenues improve 4%-5%, which I think is possible, we could have earnings for the S&P at around 120 or flat with last year. The question is, if earnings are flat at 120, is the market expensive? It certainly isn't in bubble territory. Bubbles occur at 25 and 30 times. We're a little above 17. My characterization of the market is that the market is somewhat overvalued, maybe modestly overvalued, not cheap, not in bubble territory.
There are other ways to look at it, as I said, I've always wanted to have a balanced presentation. If the market is somewhat overvalued, why is it not going down? The reason is that the earnings yield is attractive. You can see here that the earnings yield and the 10-year treasury yield are usually pretty close together. Now the earnings yield on the market is above 5%. The 10-year treasury yield is a little above 2%. The spread, the earnings yield spread with treasuries is quite favorable, that's why the market has been able to hold its own, rise slightly in the face of a great deal of confusion about earnings. It's because of the earnings yield concept, not the absolute earnings level. Here's the Shiller way of looking at it, which takes earnings over a decade.
On that basis, the price-earnings ratio is 27 times. He's arguing that the market is very overvalued, but he's been arguing that for a long time. You could argue that the market is dangerous because the number of IPOs is so great. It certainly was great, reached a peak in 2014, but IPOs are running at about half the level they were running at in 2014. There's still a healthy IPO market, but it's not as vigorous as it was last year. Here we have merger and acquisition activity. It's very intense, both in Europe and the U.S. What's the reason behind it? Well, as I said, there isn't enough demand out there to have significant revenue growth. Revenue growth, I think this year, will be about 4% overall in the U.S.
If you have modest revenue growth, you're looking for other ways to improve your earnings per share. That's why you see so much financial engineering going on. You see a heavy use of share buybacks, you see a large number of strategic acquisitions. Why do companies do that? They make a strategic acquisition because they can cut back on the workforce, they can cut back on the administrative expenses, and if they don't have significant revenue growth, they can have a rise or an increase in earnings per share. The intense deal activity is because it's the only way they can show earnings progress. They can't show it by coming out with a new product or because the demand out there is causing significant sales increases that'll improve their profit margins.
Share buybacks and merger and acquisition activity is intense because that's the only way CEOs can show earnings improvement. This shows Warren Buffett's favorite measure, market capitalization as a percentage of GDP. It's not at the 2007 peak, but it is up there. I think U.S. companies are very global right now, so I think just looking at the market capitalization as a percentage of U.S. GDP is too narrow a view. This shows share buybacks. I do think that year to date or with these figures, they were low, but I do think, as you'll see in a subsequent chart, this one, share buybacks are going to be at about the same rate as they were last year. M&A activity will be right up there with a peak. Bond issuance will be lower. Dividends will be higher.
Capital expenditures will be higher, that will be for labor-saving equipment rather than building new free-standing structures. Corporate cash balances are very generous, the companies have the money to do all of this. Buying your own shares back has been good for corporations. The companies that have been buying their own shares back have shown better market appreciation than those that haven't. In terms of our fiscal dilemma, no matter what the tax rate is, tax revenue should always come in between 15%-20% of total GDP. We've improved our budget deficit down to less than 3% of GDP, I think we're in a position to do the kind of infrastructure spending, job training, and R&D that would improve the economy. The thing we have to worry about with rising interest rates is that it increases the cost of servicing the $17 trillion in debt.
We want interest rates to go up somewhat because they're aberrantly low. We don't want them to go up too much because that would put a burden on the budget deficit. The federal government, which has been a drag on the economy, is now going to be a positive contributor, and that's one of the reasons for optimism. This is healthcare. This is a new chart. You can see that going back into the 1960s, we were only spending about 2% of GDP on healthcare. Now it's 15%. We're spending 15% of total consumer spending. Total consumer spending is 68.5% of GDP, and 15 percentage points of that 68 is on healthcare. Back in the 1960s, we were spending, the consumer was 16% of GDP, and healthcare was only 2%. Here's a chart probably very few of you have seen.
This is the daily caloric intake in the U.S. Look at how fast that's risen since 1980. Obesity is one of the major problems in the U.S., and it leads to diabetes, heart disease, and a host of other healthcare problems. If we really want to improve our healthcare expenditures, reducing the number of overweight people would really be a strong step forward. I showed this chart to a foundation yesterday, the day before yesterday. They have a program on obesity, and they were going to step it up. There's a lot of talk about the fact that the fat cats in the society have had it too good. This shows that in 1996, the top 1% were only paying 26% of total taxes. Now they're paying 38%. The question is, what is the fair share?
A lot of people think taxes on the 1% should be raised. Maybe that's right. They're already paying 38% of all taxes. The real problem is that the bottom 50% are only paying less than 3% of all taxes. They were, in 1996, paying more than double that. The people who want entitlements to expand don't have a lot of skin in the game. This is going to be an important issue in the election, where you're going to hear Hillary Clinton say she wants to end inequality. One of the ways to do that is to increase entitlements. Another way is to increase job opportunity. I hope she goes that route.
The bottom 50% of income earners are going to clamor for more government intervention to improve their lot, and they're going to want to take it away from those that have benefited the most. Maybe taxes on the rich will go up. I'm not sure that government expenditures are going to solve this problem. I think the real problem is that we have to create more opportunity in the economy, and that is going to come through getting the economy growing faster and creating more job training programs. Just going around the world, Europe is going to grow between 1% and 2% now that the Greek cloud is lifted. I think European retail sales are going to be positive. Europe is going to be on a shallow growth path. European exports around the world are going to improve. The emerging markets have done nothing.
I like a few of them. One of them, you can see some of them are doing well. Brazil, which is one of them, is not. You can see India is doing well, Indonesia is doing well, China is doing well. The three that I like the most are India, Mexico, and South Korea. This shows that India, in dollars, has had a correction, but generally has done well since Modi has been elected. Mexico is doing relatively well, and if I'm right and the U.S. economy has a stronger second half, Mexico will benefit from that. This shows that China still has a problem in trying to increase the consumer as a percentage of GDP, but they're doing that, and they've got to keep doing that. That's the route to a healthier Chinese economy.
They've enriched the economy by too much infrastructure and state-owned enterprise spending, and they've got to make the consumer a more important component of the economy, and they're doing that. Turning briefly to Japan. They've had negative growth, but it's positive now. Abenomics is working, as I said. I think Japan will grow at about 1%, but this looming problem of the aging population is a significant one. Japan is a miracle. It has to import all its natural resources. It has an aging population. I think it will grow at about 1.5% this year. I think corporate governance is improving there. Wages are going up, which has been an important objective of Shinzo Abe's three-arrow program. As a result of that, the earnings per share for the Nikkei 225 have been expanding.
The multiple in Japan is lower than it is in Europe and the United States, and there are a lot of attractive companies there. Japan has picked up the buyback bug. The yen has been weak. That's helped their exports. The government expenditures and government debt has expanded, and the economy has started to pick up a little momentum on its own. This shows the stock market has responded, both in yen and in dollars. Here's a chart of the buybacks, and they have been quite strong. That's all I wanted to say formally. Here are our disclaimers. Now I want to turn the call back to Joan to see if any of you had any questions that I might be able to shed some light on.
Great. Thanks, Byron. We have time for a few, so I'm going to bundle them here in topics. There are several questions around Greece, and clearly this is an area many economists, investors, regulatory government bodies are spending time on. The first question is, it's a small economy, why are we spending so much time on it? Maybe more importantly, what more does Greece need to do beyond austerity to move the economy forward? Will it be viable? Do you think that what happens with Greece will be a trigger either way for Eurozone staying together or its dissolution?
Well, I think it's absolutely clear that the powers that be in Europe, which are mainly Germany and France, particularly Germany, want to keep the euro together as long as possible. As Paul Krugman and others have argued, it's a flawed concept. The original idea was it would be a monetary union, but it would lead to a banking union and ultimately some form of political cohesion. They've made no progress on those last two points. It's a flawed concept, but they're going to try to hold it together as long as possible. What could Greece do? Well, look, some of those reforms make sense. Greece has one of the most generous pension programs of any country in Europe, so they've got to trim that back. They've got to make the work rules more flexible. It's very hard to break into a lot of the trades in Greece.
They've got to do something to stimulate the economy. Right now, it's pretty much tourism and olive oil. They have really no manufacturing base, but they've got to make tourism as attractive as possible. There are a number of the reforms that are being imposed on them that actually could help the economy. I don't think they're going to have a budget surplus anytime soon, so I think they're going to have to have additional help. My view is that it's only 2% of the Eurozone GDP, and I think Europe is prepared to pay that price. They're going to try to sustain Greece as an economy that needs aid for an indefinite period.
Second on energy. When you looked at the average multiple, you correctly pointed out that S&P multiple's up, but how much of that is really attributed to lower expectations on energy earnings and earnings related to that? Second, what do you see as the catalyst to rising oil prices given the slowdown in China?
Well, look, what I said is that the price of oil is really. You can look at the price of oil in relation to world GDP growth. World GDP growth that I showed early in the presentation was below three. It's expected to be above three next year. The best thing that can happen to oil is that world GDP growth increases. It's true that Iran is going to be putting some oil into the market, but I don't think that's going to make a major difference. I think the world in 2016 is going to grow above 3%, and that's going to help oil prices. Not push them back to $107, but allow them to go back to $70. It's worldwide demand. Why is that going to happen?
You're going to continue to have an expanding middle class in India, in China, in Indonesia, in Mexico, and a number of developing countries. That's where the demand for additional oil is going to come from.
Finally, you raised two potential solutions to continuing to improve our economic growth. One, infrastructure spending, two, job training. Those ideas have been talked about for years. I think it's hard to find folks who don't think they're a good idea. What does it take to actually drive that forward?
Well, what I think it takes is a belief that GDP would improve. You're going to hear a lot of people, a lot of candidates, the 16 Republican candidates and the half a dozen Democratic candidates, they're going to talk about creating more jobs. The best way to create jobs is to stimulate GDP. The best way to stimulate GDP is to have infrastructure spending. They're definitely going to have that. Supplementing or providing job training for those who've been displaced by the recession and by the automation of industrial plants, that's a positive, too. I think the only thing that's going to turn that around is the political process where both the Republican and the Democratic parties are going to try to appeal to the middle class that feels disadvantaged by the recovery.
My hope is that both parties embrace the infrastructure argument, both parties embrace the job training argument, and government expenditures expand because we can afford it. Right now, you've had the Republicans resisting it, and I hope they soften their position on that because that would really get the economy going again, and we need it. I showed you where the private sector capital stock is 22 years old. God knows how old the public sector capital stock is. We haven't had any bridges collapse or disasters. If we don't do something about it, we're going to find that we have a third-world infrastructure that's really endangering our population.
Thank you, Byron. Do you have any final remarks?
No, but I have an optimistic view of the outlook. We'll have a third quarter webinar in October, and I certainly hope things are going my way by that time. I would say of all the webinars I've made in the last six years, this one is probably the riskiest because I'm saying that we're going to have a clear recovery in the second half, and we'll see whether that's developing in the October webinar. I hope you'll all be listening and watching at that time.
Great. Thanks, Byron. Yes, please join us on October 29th for Byron's next webinar, and thanks for joining us today. Thank you, Byron.