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

 

Weekly Market Commentary – January 23, 2017

The Markets

Markets weren’t quite sure which direction to move last week.

The Trump rally, which lost some steam, gained momentum early in the week. The Standard & Poor’s 500 Index finished January 19, the day before the inauguration, with its biggest election-to-inauguration gain since Bill Clinton won a second term in 1996, according to MarketWatch, and the Dow Jones Industrial Average remained within striking distance of 20,000, according to Yahoo!Finance.

On Friday, President Trump delivered his inauguration address, but it didn’t resolve the uncertainty that has been nagging investors. The speech mentioned infrastructure activity, brushed over stimulus spending and tax cuts, and leaned heavily into protectionism. Mr. Trump said:

America will start winning again, winning like never before. We will bring back our jobs. We will bring back our borders. We will bring back our wealth. And we will bring back our dreams. We will build new roads, and highways, and bridges, and airports, and tunnels, and railways all across our wonderful nation. We will get our people off of welfare and back to work – rebuilding our country with American hands and American labor. We will follow two simple rules; buy American and hire American.

The market response to Friday’s speech was subdued, according to Financial Times:

“…with U.S. stocks edging higher, Treasuries putting in mixed performances and the dollar easing back against its main rivals. Oil prices rose sharply amid hopes that producers would show compliance to a global deal to cut output. Gold initially struggled for traction but held above the $1,200 an ounce mark.

All major U.S. stock markets finished the week slightly lower, and 10-year Treasury yields finished the week slightly higher.

Data as of 01/20/2017

1-Week

YTD 1-Year 3-Year 5-Year

10-Year

Standard & Poor’s (Domestic Stocks)

-0.2%

1.5% 22.2% 7.2% 11.5%

4.8%

Dow Jones Global ex-US

-0.5

2.5 18.2 -2.6 2.3

-1.1

10-Year Treasury Note (Yield Only)

2.5

N/A 2.0 2.8 2.0

4.8

Gold (per ounce)

0.9

3.6 9.0 -1.5 -6.2

6.5

Bloomberg Commodity Index -0.2 1.0 21.3 -10.9 -9.0 -5.8
DJ Equity All REIT Total Return Index 0.7 0.8 18.8 11.8 11.3 4.7

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.

TREMENDOUS. AWE-INSPIRING. GROUNDBREAKING. OVERWHELMING.

Those were just a few of the adjectives used to describe 2017’s Consumer Electronics Show (CES), which showcased all kinds of new technology. This year, gadgets and gizmos included wall-sized televisions that are as thin as house keys, computers that scan 2D and 3D objects, and beds that read biometric clues to warm your feet and reduce snoring. Here are a few notable trends that captured media attention:

Smart cars. Black Enterprise reported, “If there was one, star attraction at CES this year, arguably it was vehicles…Artificial intelligence is the power behind the new crop of autonomous, assistive vehicles. These cars not only self-drive, they can read your emotions, make snap decisions in the presence of danger on the road, and can even tell you about the flora and fauna at your destination site.”

Smarter homes. CNET Magazine wrote, “For…years, we’ve been saying the “real” smart home is just around the corner. But at CES 2017, it finally felt more tangible than ever before…Whether it’s lighting, DVRs, refrigerators, robot vacuums, home security systems, phones, or cars – to name just a few – the list of stuff you’ll be able to interact with…is set to explode in the coming months. And with such networked integration now becoming the rule rather than the exception in major appliances…there’s no turning back.”

Even smarter routers. Popular Science liked a new Wi-Fi router that “…rather than protecting each of your devices individually…will use…software to protect up to 20 laptops, computers, tablets, or smartphones – and an unlimited number of IoT devices – in one fell swoop…You’ll be able to monitor…all devices connected to the router, through a smartphone app…You can even tell the router to turn off internet access to certain devices – or devices linked to a particular profile – at certain times. So, you can make sure little Johnny isn’t up all night watching YouTube videos on any of his devices (except for his phone, maybe, but that’s your own dang fault for getting the kid a data plan).”

Of course, trends in technology are just one American story. Another trend, in some states, is the growing popularity of rural, sustainable, off-the-grid properties, according to NPR. “Despite the remoteness of these homes, they’re not backwoods shacks with sagging metal roofs. Some… listings sell for more than $1 million if there’s a lot of land and if water rights are included. The one with the helicopter pad is a spiffy, two-story log home with a wraparound porch.”

 

Weekly Focus – Think About It

When I dare to be powerful, to use my strength in the service of my vision, then it becomes less and less important whether I am afraid. –Audre Lorde, African American writer

Weekly Market Commentary – January 17, 2017

The Markets

Around the world in a few paragraphs…

The post-election adrenaline rush may be over in the United States. Barron’s reported:

The new year began with high hopes, with the bulls expecting the rally that began with Donald J. Trump’s election victory to continue into 2017, while the bears salivated at the opportunity presented by a market that had gotten way ahead of itself. Instead, the market has failed to break up or down…At his press conference last week, Trump covered a lot of ground…But he didn’t cover the three subjects investors especially wanted to hear about – namely taxes, fiscal policy, and infrastructure. As a result, some of the primary beneficiaries of the Trump trade stalled: The S&P 500 Financials index declined 0.1 percent, while the energy sector dropped 1.9 percent.

Investors in the Asia Pacific region were less optimistic last week, too. Disappointing economic and international trade data from China unsettled markets, as did uncertainty about the global trade policies the new U.S. administration will pursue. National indices for Australia, Japan, China, Indonesia, Malaysia, and the Philippines finished the week lower.

In the United Kingdom, the FTSE 100 gained for the 14th consecutive day, closing at an all-time high for the 12th time in as many days, according to Trading Economics. Bloomberg reported European shares eked out a gain for the third straight week. Financials led the way after a large industry firm reported better-than-expected profits, inciting optimism about fourth quarter’s earnings season.

Data as of 01/13/2017

1-Week

YTD 1-Year 3-Year 5-Year

10-Year

Standard & Poor’s (Domestic Stocks)

-0.1%

1.6% 20.3% 7.7% 12.0%

4.7%

Dow Jones Global ex-US

1.0

2.9 12.2 -2.3 3.2

-0.9

10-Year Treasury Note (Yield Only)

2.4

N/A 2.1 2.8 1.9

4.8

Gold (per ounce)

1.2

2.7 9.4 -1.6 -6.2

6.6

Bloomberg Commodity Index -0.2 -0.2 14.0 -11.3 -9.3 -5.7
DJ Equity All REIT Total Return Index -1.8 0.1 14.2 12.3 11.7 4.7

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.

 

Burgernomics: Here’s A Big Mac Index Update

The Economist invented the Big Mac index in 1986 as an entertaining way to assess whether currencies were at the “correct” levels. The index reflects the idea that countries’ exchange rates should balance so the same product (in this case, a hamburger) costs the same in two different countries when the price is denominated in the same currency. After updating the index on January 11, 2017, The Economist reported the “all-meaty” dollar was stronger than usual:

The dollar is now trading at a 14-year high in trade-weighted terms. Emerging-world economies may struggle to pay off dollar-denominated debts. American firms may find themselves at a disadvantage against foreign competition. And, American tourists will get more burgers for their buck in Europe.

A Big Mac in the United States cost about $5.06 last week. In the Euro area, the price was about $4.06 and in Britain $3.73. A Big Mac is cheapest in Russia ($2.15) and most expensive in Switzerland ($6.35). Here are the prices of a Big Mac (a.k.a. the Maharaja Mac in India) in a few other locales:

Norway           $5.67

Sweden           $5.26

Brazil               $5.12

Japan               $3.26

China               $2.83

India                $2.49

Mexico            $2.23

It should be noted the Big Mac index is not a perfect measurement tool. The price of a burger should be less in countries with lower labor costs and more in countries with higher labor costs. When prices are adjusted for labor (using gross domestic product per person), the Brazilian real is the world’s most overvalued currency, followed by Pakistan and Thailand. The most undervalued currencies include Egypt, Malaysia, and Hong Kong.

 

Weekly Focus – Think About It

The charm of fishing is that it is the pursuit of what is elusive but attainable, a perpetual series of occasions of hope. –John Buchan, Former Governor General of Canada

Sources:

  1. http://www.barrons.com/articles/stocks-grow-weary-of-the-trump-trade-1484381416?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-17-17_Barrons-Stocks_Grow_Weary_of_the_Trump_Trade-Footnote_1.pdf)
  2. http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html (Click on U.S. & Intl Recaps, “Still unknowns,” scroll down to Global Stock Market Recap chart) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-17-17_Barrons-Global_Stock_Market_Recap-Footnote_2.pdf)
  3. http://www.tradingeconomics.com/united-kingdom/stock-market
  4. https://www.bloomberg.com/news/articles/2017-01-13/european-stocks-rise-as-carmakers-health-care-shares-rebound
  5. http://www.economist.com/content/big-mac-index (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-17-17_TheEconomist-The_Big_Mac_Index-Footnote_5.pdf)
  6. http://www.economist.com/news/finance-and-economics/21714392-emerging-market-currencies-and-euro-look-undervalued-against-dollar-our-big (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-17-17_TheEconomist-Our_Big_Mac_Index_of_Global_Currencies_Reflects_the_Dollars_Strength-Footnote_6.pdf)
  7. http://www.saltstrong.com/articles/funny-fishing-quotes/

Weekly Market Commentary – January 9, 2017

The Markets

…And, they’re off!

Bullish sentiment helped world equity markets get off to a fast start last week. Just name a country or region – developed markets, emerging markets, the United States, Latin America, Asia, Europe, the United Kingdom – and it’s likely the area’s benchmark index may have been up for the week.

Not everyone was in the bullish camp, though. Barron’s reported:

The market optimism is understandable. After a long spell of zero interest rates, a baton transfer from monetary manipulation to fiscal stimulus and pro-growth chutzpah can be an exciting regime change…But investors’ hopes could be misplaced. It would be one thing if there were shovel-ready infrastructure projects or proposed tax cuts on the table that could quickly boost spending. Instead, Republicans propose, for example, changing the basis for corporate tax from location of operations to location of sales. The aim is to encourage domestic production and exports, but the plan could hurt companies that import materials or goods. Will big importers like [big box stores] pass the tax hit onto consumers by raising prices?

For contrarians, record highs for U.S. stock markets (both the Standard & Poor’s 500 Index and NASDAQ closed at new highs last week) and strong bullish sentiment (Barron’s reported, “The Investors Intelligence survey of newsletter writers showed the bullish herd swelling above 60 percent…”) are red flags, signaling an inflection point may be near.

No matter which camp you fall into, there is a lot of uncertainty. Which policies will the new administration pursue? Will China’s growth slow more quickly than expected? How quickly will the Federal Reserve raise rates? Will interest rates continue to move higher? Will a stronger dollar negatively affect emerging markets? In the face of so much uncertainty, it’s important to be diversified.

Data as of 01/06/2017

1-Week

YTD 1-Year 3-Year 5-Year

10-Year

Standard & Poor’s (Domestic Stocks)

1.7%

1.7% 14.4% 7.6% 12.3%

4.9%

Dow Jones Global ex-US

2.0

2.0 8.3 -2.4 3.3

-0.9

10-Year Treasury Note (Yield Only)

2.4

N/A 2.2 3.0 2.0

4.7

Gold (per ounce)

1.5

1.5 7.7 -1.9 -6.2

6.8

Bloomberg Commodity Index -0.2 -0.2 14.0 -11.3 -9.3 -5.7
DJ Equity All REIT Total Return Index 2.0 2.0 10.6 13.2 12.4 5.4

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 you thinking about starting a business?

Small businesses in the United States employed 56.8 million people or 48 percent of the private workforce in 2013 (the latest numbers available), according to the U.S. Small Business Administration. That’s pretty remarkable when you realize that 34 percent of small businesses employ fewer than 100 people.

If you’re thinking of starting a business, the AARP suggests you carefully consider legal and tax issues, including:

  • Business structure. Will you be a sole proprietor? Or will you establish a corporation, limited liability company, or partnership? The structure of your business will affect taxes, liability, and other matters.
  • Many cities and states require a new business to register, apply for a business license, and pay an annual fee to do business.
  • Tax payments. Talk with a tax professional to determine whether you need to make quarterly tax payments. Also, be aware that people who work for themselves pay both the employer and employee portions of Social Security and Medicare taxes. You’ll want to factor that in when deciding pricing for products or services.
  • In many cases, your business will need its own bank account and credit cards. You’ll also need a system for tracking business receipts and expenditures. Investing in business accounting software can make recordkeeping a lot easier.
  • Contracts specify deadlines, terms of payment, and other particulars, ensuring everyone shares the same understanding and expectations. If your client asks you to sign a contract or asks you to provide a contract, consult with your attorney.
  • Liability insurance. Professional liability insurance protects you if you’re ever sued, and some clients may require you to have coverage. Talk with your financial or insurance professional to determine what type of coverage you may need.

Of course, when you work for yourself, it’s critical to set money aside for retirement. Contact your financial and/or tax professional to discuss options that might work for you.

 

Weekly Focus – Think About It

We have neglected the truth that a good farmer is a craftsman of the highest order, a kind of artist.

–Wendell Berry, American novelist and poet

Sources:

  1. http://www.barrons.com/articles/cheering-and-fearing-the-post-trump-rally-1483767229?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-09-17_Barrons-Cheering_and_Fearing_the_Post-Trump_Rally-Footnote_1.pdf)
  2. http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_hps (Click on U.S. & Intl Recaps, then on “Equities rise to the occasion”) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-09-17_Barrons-Global_Stock_Market_Recap-Footnote_2.pdf)
  3. http://www.reuters.com/article/emerging-markets-latam-idUSL1N1EW1QN
  4. http://www.barrons.com/articles/no-cigar-yet-dow-stops-short-of-20-000-1483767234 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-09-17_Barrons-No_Cigar_Yet-Dow_Stops_Short_of_20000-Footnote_4.pdf)
  5. https://www.sba.gov/sites/default/files/advocacy/all_profiles_10_18_16.pdf
  6. http://www.aarp.org/money/taxes/info-2016/tax-issues-for-independent-workers.html?intcmp=AE-MON-MAIN-TAXS-SPOT2
  7. http://cdn.modernfarmer.com/wp-content/uploads/2016/02/berry2.jpg