After two years of shunning Wall Street, graduates of Harvard College are heading back into finance and consulting. And judging by prior years, that’s bad news for the stock market.
Among members of Harvard’s class of 2013 who secured jobs before graduation, 16% are going into consulting and 15% into finance, making those the most popular industries, according to the Harvard Crimson’s annual survey. The combined 31% in finance and consulting is up sharply from 21% in 2012 and 22% in 2011.
Harvard’s interest in Wall Street, though, should make investors blanch. Since at least 2007, whenever the portion of Harvard College graduates choosing finance or consulting for their careers has increased, the stock market has declined the following year. The opposite is also true: when Harvard flees Wall Street, the market rebounds.
In 2007, 47% of Harvard graduates went into finance or consulting. The next year was the start of the global financial crisis, and the S&P 500 lost nearly half its value. The market bounced back in 2009 and 2010, after Harvard’s classes of 2008 and 2009 opted for careers elsewhere. And the pattern more-or-less repeated itself in the following three years.
Of course, while there are worse theories for why markets move, the correlation of Harvard graduate career choices to the S&P 500 does not imply causation. It’s as specious as a similar theory about Harvard Business School graduates. The relationship simply illustrates some hard truths: Harvard graduates like money, choose careers based on salary, and are terrible predictors of the future. In other words, Harvard is a trailing indicator.
The average starting salary for members of Harvard’s class of 2013 who have jobs is about $60,000, which is higher than the median US household income of $52,762. But the students heading to Wall Street and related fields will earn even more: 71% of those entering consulting will earn between $70,000 and $90,000, according to the Crimson survey, and 21% of those entering finance will make more than $110,000.
Harvard’s class of 2013 isn’t planning to stay in those industries, though. Only 5% expects to be working in finance in 10 years, and just 1% see themselves in consulting.
Yeah, yeah, keep telling yourselves that, kids.