Weekly Market Commentary – February 13, 2017

­Weekly Market Commentary

February 13, 2017

The Markets

What’s the word ‘phenomenal’ worth? It all depends on who says it.

Barron’s shared Wilshire Associates’ calculations which indicated the word was worth about $175 billion – the amount markets gained last Thursday – when President Trump used it to describe the tax plan his administration will deliver “ahead of schedule.” Markets gained another $100 billion in value on Friday. Barron’s reported:

“While tax reform is definitely coming, a final bill is still a long way off, and a 2017 effective date is looking less likely…Yet, as the action late last week suggests, the equity markets are more than willing to give the new administration the benefit of the doubt. Something’s coming, even if we don’t know what or when. And that seems good enough to bid stocks higher…”

The word ‘phenomenal’ is probably worth a bit less than Wilshire’s estimate. United States stocks pushed higher on positive earnings growth, too. With 71 percent of companies in the Standard & Poor’s 500 Index reporting results for the fourth quarter of 2016, “…the blended earnings growth rate for the S&P 500 is 5.0 percent. The fourth quarter will mark the first time the index has seen year-over-year growth in earnings for two consecutive quarters since Q4 2014 and Q1 2015.”

Consumer confidence remained high, but wavered a bit in February, according to the University of Michigan Surveys of Consumers. Americans are happy with their current financial circumstances, but expectations for the future dropped sharply. Surveys of Consumers chief economist, Richard Curtin, wrote:

“… a total of nearly six-in-ten consumers made a positive or negative mention of government policies. In the long history of the surveys, this total had never reached even half that amount…These differences are troublesome: the Democrat’s Expectations Index is close to its historic low (indicating recession) and the Republican’s Expectations Index is near its historic high (indicating expansion). While currently distorted by partisanship, the best bet is that the gap will narrow to match a more moderate pace of growth.”

This week could be bumpy. On Valentine’s Day, Fed Chair Janet Yellen will testify about the state of the economy before the U.S. Senate.

Data as of 2/10/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 0.8% 3.5% 25.1% 8.8% 11.5% 4.9%
Dow Jones Global ex-U.S. 0.4 4.7 19.2 -1.0 2.0 -1.0
10-year Treasury Note (Yield Only) 2.4 NA 1.7 2.7 2.0 4.8
Gold (per ounce) 1.1 6.0 3.2 -1.3 -6.4 6.3
Bloomberg Commodity Index 1.6 2.1 20.9 -11.3 -9.2 -5.9
DJ Equity All REIT Total Return Index 1.1 1.9 22.4 11.6 10.9 4.3

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

on the road to brexit…Last week, Members of Parliament (MPs) approved the Article 50 bill, green-lighting Britain’s exit from the European Union (EU). If the House of Lords follows suit, which is far from certain, then the British government will follow the lead of the British people and invoke Article 50 of the Lisbon Treaty. (Article 50 gives member states the right to withdraw from the EU.)

The Economist reported:

“But a different sort of Brexit bill is approaching and will be harder to manage. It could yet scupper the whole process. Leave campaigners promised voters that Brexit would save the taxpayer £350m ($440m) a week. That pledge was always tendentious. But officials in Brussels are drawing up a bill for departure that could mean Britain’s contributions remain close to its membership dues for several years after it leaves. In a new report for the Centre for European Reform, a think-tank, Alex Barker, a Financial Times correspondent, puts the figure at anything between €24.5bn ($26.1bn) and €72.8bn.”

Michel Barnier, the EU’s chief Brexit negotiator, indicated the matter of how much Britain owes must be settled before questions about Britain’s future relationship (i.e., trade agreements) with the EU can be addressed, according to Bloomberg.

To date, Prime Minister Theresa May has been taking a hard line, which has roiled tempers throughout the EU. Bloomberg reported the Prime Minister’s comments:

“…are elevating the likelihood that the United Kingdom leaves the bloc in 2019 without an exit deal, let alone the sweeping trade pact it seeks…The messages from the diplomats are that EU governments are preparing to enforce their line that the United Kingdom can’t be better off outside the bloc than inside it and that they value safeguarding their own interests and regional stability above the need to maintain good relations with the United Kingdom.”

The pending negotiations bring to mind the words of German Field Marshal Helmut Von Moltke, “No operation extends with any certainty beyond the first encounter with the main body of the enemy.”

Weekly Focus – Think About It

“What counts for most people in investing is not how much they know, but rather how realistically they define what they don’t know.”

–Warren Buffett, The Oracle of Omaha

Best regards,

John F. Reutemann, Jr., CLU, CFP

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

Securities offered through Research Financial Strategies, Member FINRA/SIPC.

* These views are those of Peak Advisor Alliance, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.

* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.

* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.

* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

* To unsubscribe from the Weekly Markey Commentary please reply to this e-mail with “Unsubscribe” in the subject line.

Sources:

http://www.barrons.com/articles/magical-mystery-tax-plan-1486794351?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-13-17_Barrons-Magical_Mystery_Tax_Plan-Footnote_1.pdf)

http://insight.factset.com/hubfs/Resources/Research%20Desk/Earnings%20Insight/EarningsInsight_021017.pdf

http://www.sca.isr.umich.edu (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-13-17_UniversityofMichigan-Surveys_of_Consumers-Footnote_3.pdf)

http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_hps (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-13-17_Barrons-Yellen_to_Give_Semiannual_Monetary_Policy_Testimony-Footnote_4.pdf)

https://www.ft.com/content/7c25dd1c-ee1f-11e6-930f-061b01e23655 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-13-17_FinancialTimes-MPs_Give_Green_Light_for_Theresa_May_to_Trigger_Brexit-Footnote_5.pdf)

http://www.europarl.europa.eu/RegData/etudes/BRIE/2016/577971/EPRS_BRI(2016)577971_EN.pdf

http://www.economist.com/news/britain/21716629-bitter-argument-over-money-looms-multi-billion-euro-exit-charge-could-sink-brexit?cid1=cust/ddnew/n/n/n/2017029n/owned/n/n/nwl/n/n/NA/email (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-13-17_TheEconomist-The_Multi-Billion-Euro_Exit_Charge_that_Could_Sink_Brexit_Talks-Footnote_7.pdf)

https://www.bloomberg.com/news/articles/2017-02-10/bad-tempered-brexit-talks-loom-as-may-s-demands-irk-eu-officials

http://www.ralphkeyes.com/quote-verifier/

http://www.marketwatch.com/story/the-genius-of-warren-buffett-in-23-quotes-2015-08-19

 

Weekly Market Commentary – January 30, 2017

­Weekly Market Commentary

January 30, 2017

The Markets

An historic moment for U.S. stock markets…

The Dow Jones Industrial Average surpassed 20,000 last week. Barron’s cautioned investors not to make too much of the milestone since, “There are only 30 stocks in the index so each one carries a lot of weight.”

Regardless of the significance of the Dow’s move, U.S. stock markets generally were upbeat about President Trump’s first week in office. Financial Times reported ‘animal spirits’ – a term British economist John Maynard Keynes used to describe the emotions that drive consumer and investor confidence – returned as rapid executive action indicated the new President would follow through on campaign promises, including infrastructure spending.

“However, the Trump trade – reflecting hopes of tax cuts, higher infrastructure spending, and an easing in business regulation – that had dominated financial markets since November also underwent a subtle shift this week. While financial shares still shone, it was sectors that will benefit from infrastructure spending and cope with higher inflation that led the way. Up 3.4 percent, the materials sector was the best performer on the S&P 500 with miners also seeing gains.”

Concerns about trade protectionism and rising inflation lingered.

U.S. stocks upward move was also supported by earnings growth. At the end of each quarter, companies report their earnings (which indicate how much profit they made during the period). FactSet reported 34 percent of companies in the Standard & Poor’s 500 Index have reported fourth quarter earnings, so far. Altogether, earnings are 2.7 percent above the estimates, although they remain below the five-year average.

Markets could be in for a bumpy ride next week as investors weigh in on President Trump’s immigration ban. Bloomberg reported one large technology company, “…inserted language in a securities filing on Thursday on the issue, cautioning investors that immigration restrictions ‘may inhibit our ability to adequately staff our research and development efforts.’”

Data as of 1/27/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 1.0% 2.5% 21.9% 8.8% 11.8% 4.9%
Dow Jones Global ex-U.S. 1.6 4.1 15.3 -1.0 2.3 -0.9
10-year Treasury Note (Yield Only) 2.5 NA 2.0 2.8 1.9 4.9
Gold (per ounce) -1.3 2.2 6.2 -2.0 -7.3 6.3
Bloomberg Commodity Index -0.5 0.5 15.6 -11.2 -9.7 -5.8
DJ Equity All REIT Total Return Index -0.8 0.0 14.4 12.3 10.5 4.3

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

ARE YOUR CHILDREN SMART SHOPPERS? Science Daily reported a meta-analysis of 73 studies nationwide evaluated parenting styles and children’s buying habits. The findings suggest, “children raised by parents who set limits and explain the reason behind these limits are most likely to develop into wise consumers.”

The study, which was conducted by the Society for Consumer Psychology, looked at the ways parents raise and communicate with their children. It defined four basic parenting styles:

  • Authoritative parents generally tell children what to do and also explain why the children should do it. “These parents tend to relate quite effectively with their children and expect them to act maturely and follow family rules, while also allowing a certain degree of autonomy.”
  • Authoritarian parents are restrictive, too. They tell children what to do, but don’t often explain why it should be done. These parents are “…not as likely to exhibit as much warmth in their communications.”
  • Neglecting parents don’t offer much guidance or actively monitor children’s activities. “They neither seek nor use parental power and control and, as a result, communication between Neglecting parents and their children is generally strained and minimized.”
  • Indulgent parents often “…give children adult rights without concomitant responsibilities while maintaining an open communication environment with children.” These parents are described as “lenient, compliant, accepting, affirmative, and non-punitive.”

The researchers concluded children whose parents take an authoritative approach to parenting tend to make better choices. The children choose to consume healthier foods (like fruits and vegetables), make better safety decisions (such as wearing a bike helmet), develop self-esteem, and offer viable opinions with regards to family consumption decisions.

Weekly Focus – Think About It

“Americans of all ages, all conditions, all minds constantly unite. Not only do they have commercial and industrial associations in which all take part, but they also have a thousand other kinds: religious, moral, grave, futile, very general and very particular, immense and very small; Americans use associations to give fêtes, to found seminaries, to build inns, to raise churches, to distribute books, to send missionaries to the antipodes; in this manner they create hospitals, prisons, schools. Finally, if it is a question of bringing to light a truth or developing a sentiment with the support of a great example, they associate.”

–Alexis de Tocqueville, Author of ‘Democracy in America’

Best regards,

John F. Reutemann, Jr., CLU, CFP

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

Securities offered through Research Financial Strategies, Member FINRA/SIPC.

* These views are those of Peak Advisor Alliance, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.

* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.

* Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.

* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

* To unsubscribe from the Weekly Markey Commentary please reply to this e-mail with “Unsubscribe” in the subject line.

Sources:

http://www.barrons.com/articles/are-you-ready-for-dow-20-000-1481662531

http://www.economicshelp.org/blog/glossary/animal-spirits/

https://www.ft.com/content/bfb966b4-e3e5-11e6-8405-9e5580d6e5fb (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-30-17_FinancialTimes-Trump_Trade_Picks_Up_Speed_in_Presidents_First_Week-Footnote_3.pdf)

http://insight.factset.com/hubfs/Resources/Research%20Desk/Earnings%20Insight/EarningsInsight_012717.pdf (Page 5)

https://www.bloomberg.com/news/articles/2017-01-28/google-recalls-some-staff-to-u-s-after-trump-immigration-order

https://www.sciencedaily.com/releases/2016/12/161215175329.htm

https://www.journals.elsevier.com/journal-of-consumer-psychology/forthcoming-articles/meta-analysis-parental-style-and-consumer-socialization

http://www.press.uchicago.edu/Misc/Chicago/805328.html