Weekly Market Commentary – April 30, 2018

A meeting of the minds.
The Federal Reserve and the U.S. bond market appear to be in agreement about the direction of interest rates. For more years than anyone cares to count, investment professionals have been predicting the end of the bull market in bonds. Bond guru Bill Gross called the end of the bond bull in 2011 – and called it again in 2013. He wasn’t alone. Strategists who participated in Barron’s Outlooks anticipated rising interest rates in 2014 and 2015, too.

The Federal Reserve began encouraging interest rates higher in December 2015 when it increased the Fed funds rate for the first time in a decade. However, the yield on 10-year Treasuries remained stubbornly low. In fact, it fell below 2 percent following the rate hike and stayed there until November 2016.
Since 2015, the Fed has raised rates six times. The latest increase, along with signs of higher inflation, helped push bond rates higher. Higher interest rates could shift investors’ preferences in some significant ways, according to sources cited by Barron’s: “Two years ago, dividend stocks provided investors a one-percentage point advantage over risk-free rates…Now those places have been swapped…this ability to get a “safe yield” for the first time in a decade, with no risk from falling stock or bond prices, represents a ‘seminal shift and a huge source of competition for the dividend allure of the stock market.’”  We may be at a turning point.

Data as of 4/27/181-WeekY-T-D1-Year3-Year5-Year10-Year
Standard & Poor’s 500 (Domestic Stocks)0.0%-0.1%11.8%8.2%10.9%6.7%
Dow Jones Global ex-U.S.-0.5-0.413.32.53.60.2
10-year Treasury Note (Yield Only)3.0NA2.31.91.73.8
Gold (per ounce)-1.11.94.73.3-2.14.0
Bloomberg Commodity Index-0.51.46.9-4.1-7.8-8.4
DJ Equity All REIT Total Return Index2.9-5.9-1.63.95.86.0

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.

We’ll need a new kind of umbrella for this. In February, a new research paper disclosed a finding no one wants to hear about: Viruses are falling from the sky. Literally. Science Daily summarized a report from the University of British Columbia. The report said:  “An astonishing number of viruses are circulating around the Earth’s atmosphere – and falling from it – according to new research…‘Roughly 20 years ago we began finding genetically similar viruses occurring in very different environments around the globe,’ says [University of British Columbia virologist Curtis Suttle.] ‘This preponderance of long-residence viruses travelling the atmosphere likely explains why – it’s quite conceivable to have a virus swept up into the atmosphere on one continent and deposited on another.’”

The New York Times reported the researchers journeyed to Spain and used buckets on mountaintops to catch whatever might fall from the sky. The scientists weren’t surprised to find viruses, but they were surprised by the quantity of viruses captured. Best estimates suggest 800 million viruses shower every square meter of the Earth every day.
Don’t panic! Viruses are responsible for a lot more than diseases. Scientists theorize viruses and humans may have a symbiotic relationship. According to Popular Science:  “Each of us has a unique collection of viruses although there are some species common to us all…endogenous viruses make up some 8 percent of our genetic material. Originally, they were thought to be nothing more than junk pieces of evolutionary history. But we now know they have a variety of functions. One of the most studied topics…focuses on reproduction. A particular protein encoded by one particular virus…appears to be imperative for proper formation of the placenta.”

Good or bad, the question remains: where do atmospheric viruses originate? No one knows for sure. There are a variety of theories. One theory is viruses are swept from the planet into the atmosphere. Another is viruses originate in the atmosphere. A third is viruses arrive from outer space.

The truth is out there!

Weekly Focus – Think About It
“The diversity of the phenomena of nature is so great, and the treasures hidden in the heavens so rich, precisely in order that the human mind shall never be lacking in fresh nourishment.”
–Johannes Kepler, German scientist

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 email with their email address and we will ask for their permission to be added.

Investment advice offered through Research Financial Strategies, a registered investment advisor.
*  This newsletter and commentary expressed should not be construed as investment advice.
* 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 indexes 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.
* Stock investing involves risk including loss of principal.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Sources:
https://www.barrons.com/articles/BL-INCOMB-2495 (or go to http://www.barrons.com/mdc/public/page/9_3020-treasury.html

https://www.barrons.com/articles/stocks-could-rise-10-in-2016-according-to-market-strategists-1449899461

https://www.barrons.com/articles/outlook-2015-stick-with-the-bull-1418449329

http://money.cnn.com/2015/12/16/news/economy/federal-reserve-interest-rate-hike/index.html

https://www.bloomberg.com/news/articles/2018-04-26/central-banks-take-it-easy-to-give-global-growth-a-second-look

https://www.barrons.com/articles/the-stock-market-thats-never-satisfied-1524875305

https://www.sciencedaily.com/releases/2018/02/180206090650.htm

https://www.nytimes.com/2018/04/13/science/virosphere-evolution.html

https://www.popsci.com/our-viral-friends

https://www.brainyquote.com/quotes/johannes_kepler_144004?src=t_phenomena

8 Things to Know About the USA-China Trade Dispute

The headlines are filled with rumors of a trade war between the United States and China. You’ve probably heard by now that both nations have announced tariffs on many of each other’s goods.  This has many economists concerned about a trade war.  A trade war, in case you’re not familiar with the term, is “an economic conflict in which countries impose import restrictions on each other in order to harm each other’s trade.”
In response, the markets are doing their best impression of a see-saw – falling and then rising again.  Because this story probably won’t go away any time soon, let’s break it down.

Eight Things to Know about the USA-China Trade Dispute

ONE: The U.S. has announced tariffs on almost $50 billion in Chinese exports.1
The list, which stretches to over 1300 items, includes goods like medical equipment, chemicals, televisions, and automobile parts.1  This is on top of an earlier spate of tariffs on Chinese steel and aluminum.  However, many of the most commonly-used goods Americans use, like shoes, clothing, and phones, are not included.

TWO: China has retaliated with tariffs of their own.
On April 4, China announced plans to levy a 25% tariff on roughly $50 billion worth of American goods.1  This includes airplanes, cars, soybeans, and other vegetables.  Earlier, China had already declared tariffs on $3 billion worth of agricultural exports, like fruit, nuts, and pork.

THREE: The two countries aren’t actually in a trade war – yet.
Notice how often I’ve used the word “announced”?  As of this writing, none of these tariffs have gone into effect yet.  The U.S. intends to hold public hearings sometime in May, and has 180 days after that to decide whether to go through with the tariffs.2  China, meanwhile, has avoided mentioning any specific dates.  It’s possible both sides are hoping to engage in talks before the tariffs are in place.  If successful, there’s a chance the tariffs never will.
In other words, a trade war has been declared, but the “fighting” hasn’t started yet.

FOUR: Both sides see the situation very differently.
It’s safe to say neither country wants a trade war – hence the delay.  But that doesn’t mean negotiations will be simple or easy.

The issue, at least from the U.S. administration’s standpoint, is a $375 billion trade deficit2 with China, which many see as being due to unfair or even illegal trade practices.  China has a long history of forcing American companies to share their technology in order to do business there, making these companies less competitive than they might otherwise be.  In some cases, Chinese companies are alleged to have outright stolen American intellectual property.  The administration believes that tariffs will stop these practices and reduce the deficit.  China, of course, doesn’t see it the same way.  The Brookings Institution, a well-known think tank, describes it like this: “From Beijing’s perspective, the U.S.-China trade imbalance is a result of many factors—automation, evolving global supply chains, increased competitiveness of Chinese firms, the Federal Reserve’s normalization of interest rates, and the Congress’s deficit-increasing tax cuts. Because the trade balance is the difference between savings and investment, Beijing also views U.S. fiscal and monetary decisions as contributing to America’s overall trade deficit—including with China.”3

Overcoming this basic difference in opinion will probably need to happen before the two countries can strike a new deal.

FIVE: Trade wars can impact markets…
Again, we’re not yet in a trade war.  But should these tariffs go through, history suggests it will have an impact on the markets.

Tariffs are a tax on imported goods and services.  They essentially make it costlier and more difficult to import certain things, like metals, foodstuffs, consumer products, and so on.  That can be a major boon to industries that produce those same things, because it forces consumers to buy domestically.  On the other hand, China’s tariffs could make it harder for U.S. companies to sell their own goods.  For those companies that do a lot of business in China, this can have a major effect on their bottom line.  As a result, some companies’ stock price could suffer.

SIX: But that doesn’t necessarily mean the markets are going to plummet.
To give you an example, take this past Wednesday, April 4th.  When the markets opened, the news out of China caused the Dow to drop 510 points.  But the Dow rallied later in the day, ending up 300 points.4

While a trade war can be unsettling for investors, it’s important to remember that the day-to-day movement of the markets is based on many factors.  Trade is only one of these.  The overall economy is still doing well, unemployment remains low, corporate earnings continue to be solid – you get the idea.

The point is, the U.S.-China trade dispute is important, but not the be-all and end-all.  It’s something to keep an eye on, but not something to overreact to.  And again, we’re not yet in an actual trade war!  If history is any judge, there will be a lot more twists and turns to this story.  A lot can change over the next few weeks and months.

SEVEN: This is an opportunity to practice discipline.
The markets are in the habit of jumping at the slightest sound – but we’re not.  We rely on the news to stay informed and up-to-date, but not to dictate our every decision.

As a financial advisor, I can’t tell you what President Trump will do, or what China will do, or whether a trade war will happen.  I can say that we’ll keep seeing a lot of headlines on this.  Remember the see-saw metaphor?  As the situation develops, it’s not unlikely the markets will continue to rise and fall as investors digest the news coming out of Washington.  For that reason, it’s wise to expect more volatility – but let’s bear in mind that volatility doesn’t equal catastrophe. 

All this means we have a wonderful opportunity to practice discipline.  To avoid getting caught up in the day-to-day.  To not let headlines – and the emotions they evoke – control us.  The more we do this, the more we’ll keep moving toward our goals.

EIGHT: We here at Research Financial Strategies are monitoring your portfolio.
This is our job: to monitor your portfolio.  If at any point we feel the trade situation could harm your holdings and impede your progress towards your goals, we’ll let you know immediately.

In the meantime, remember: My team and I love hearing from you!  Please let us know if you have any questions or concerns.  Our door is always open.  Have a great month!

1 “All the Goods Targeted in the Trade Spat,” The Wall Street Journal, April 5, 2018.  https://www.wsj.com/articles/a-look-at-which-goods-are-under-fire-in-trade-spat-1522939292

2 “U.S. Announces Tariffs on $50 Billion of China Imports,” The Wall Street Journal, April 3, 2018.  https://www.wsj.com/articles/u-s-announces-tariffs-on-50-billion-of-china-imports-1522792030

3 “How to avert a trade war with China,” The Brookings Institution, February 27, 2018.  https://www.brookings.edu/blog/order-from-chaos/2018/02/27/how-to-avert-a-trade-war-with-china/

4 “Trade war? Not so fast. Why stocks are rallying again,” CNN Money, April 5, 2018.  http://money.cnn.com/2018/04/05/investing/stocks-rebound-trade-war-us-china/index.html

Weekly Market Commentary – April 23, 2018

The world is in debt.
The April 2018 International Monetary Fund (IMF) Fiscal Monitor reported global debt has reached a historically high level. In 2016, debt peaked at 225 percent of global gross domestic product (GDP) (the value of all goods and services produced across the world). Public debt is a significant component of global debt. The IMF wrote:  “For advanced economies, debt-to-GDP ratios have plateaued since 2012 above 105 percent of GDP – levels not seen since World War II – and are expected to fall only marginally over the medium term…In emerging market and middle-income economies, debt-to-GDP ratios in 2017 reached almost 50 percent – a level seen only during the 1980s’ debt crisis – and are expected to continue on an upward trend.”

There are numerous reasons high levels of government debt (the amount a government owes) and significant deficits (the difference between how much a government takes in from taxes and other sources and how much it spends) are a cause for concern:

  • Higher interest payments. Governments typically finance debt by issuing government bonds. When bonds mature, the government issues new debt. If interest rates have risen, the cost of that debt increases. As a result, high debt levels can make tax hikes and spending cuts a necessity, explained the Committee for a Responsible Federal Budget.
  • Lower national savings and income. You may have heard the phrase, “Robbing Peter to pay Paul,” which means taking money from one source to pay another. When a country runs a deficit, a similar thing happens. In The Long-Run Effects of Federal Budget Deficits on National Saving and Private Domestic Investment, the Congressional Budget Office explained, “…a dollar’s increase in the federal deficit results in…a 33 cent decline in domestic investment.”
  • The tax lag. In his book, Do Deficits Matter?, Daniel Shaviro suggests sustained deficit spending creates a ‘tax lag’ by shifting responsibility for current spending onto future generations.

 

The IMF Fiscal Monitor wrote, “countries need to build fiscal buffers now by reducing government deficits and putting debt on a steady downward path.”  Last week, the interest rate on 10-year U.S. Treasuries rose above 2.9 percent, which raised concerns about inflation. Markets moved higher early in the week and tumbled later in the week. The major U.S. stock indices finished the week higher.

Data as of 4/20/181-WeekY-T-D1-Year3-Year5-Year10-Year
Standard & Poor’s 500 (Domestic Stocks)0.5%-0.1%13.3%8.3%11.3%6.8%
Dow Jones Global ex-U.S.0.30.116.43.54.40.2
10-year Treasury Note (Yield Only)3.0NA2.21.91.73.7
Gold (per ounce)-0.53.14.33.8-1.33.8
Bloomberg Commodity Index0.61.96.4-3.9-7.3-8.2
DJ Equity All REIT Total Return Index-0.8-8.6-6.10.95.46.1

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 an Insect Gourmet?  Throughout history, people have eaten bugs. According to National Geographic, hunter-gatherers probably learned which insects were edible by watching birds. People’s appetite for bugs didn’t disappear as they became more civilized. Pliny, a Roman scholar, wrote beetle larvae fed a diet of flour and wine were a favorite snack of aristocratic Romans. The tradition of eating insects continues today.  According to National Geographic, “Gourmands in Japan savor aquatic fly larvae sautéed in sugar and soy sauce. De-winged dragonflies boiled in coconut milk with ginger and garlic are a delicacy in Bali. Grubs are savored in New Guinea and aboriginal Australia. In Latin America cicadas, fire-roasted tarantulas, and ants are prevalent in traditional dishes.”

Reuters said in Germany, Netherlands, and Belgium, shoppers can buy burgers made of buffalo worms (the larvae of buffalo beetles) at the local grocery. It’s a visually pleasing product, according to one of the burger company’s founders, because the insects don’t show.

In North Carolina, diners can order a tarantula burger, described as “…a hamburger topped with a crunchy full-grown, oven-roasted tarantula.” It comes with a side of fries – and possibly a drink to wash it down as fast as possible. Other restaurants across the United States offer fried silkworm larvae, red ant salad, cricket crab cakes and cricket pastry, and grasshopper rolls, according to Reuters and Spoon University.

Bon appetit! (Or should that be bug appetit?)

 

Weekly Focus – Think About It
“Then I say the earth belongs to each of these generations during its course, fully, and in their own right. The 2d. generation receives it clear of the debts and encumbrances of the 1st., the 3d. of the 2d. and so on. For if the 1st. could charge it with a debt, then the earth would belong to the dead and not the living generation. Then no generation can contract debts greater than may be paid during the course of its own existence.”

–Thomas Jefferson, Third President of the United States and principal author of the Declaration of Independence

Best regards,

John F. Reutemann, Jr., CLU, CFP®

Investment advice offered through Research Financial Strategies, a registered investment advisor.

*  This newsletter and commentary expressed should not be construed as investment advice.

* 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 indexes 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.

* Stock investing involves risk including loss of principal.

* Consult your financial professional before making any investment decision.

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

 

Sources:

http://www.imf.org/en/Publications/FM/Issues/2018/04/06/fiscal-monitor-april-2018 (Click on Chapter 1, Full Text of Chapter 1, page 1)

https://www.investopedia.com/articles/personal-finance/081315/debt-vs-deficit-understanding-differences.asp

http://www.crfb.org/blogs/marc-goldwein-national-debt-yes-rising-annual-deficits-threaten-us-economy

http://www.cbo.gov/sites/default/files/cbofiles/attachments/45140-NSPDI_workingPaper.pdf (Page 6)

http://www.press.uchicago.edu/Misc/Chicago/751120.html

http://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html (Click on “U.S. & Intl Recaps,” then “Geopolitical concerns ease”)

https://web.archive.org/web/20171025003222/https://news.nationalgeographic.com/news/2004/07/0715_040715_tvinsectfood.html

https://www.reuters.com/article/us-germany-food-insectburger/german-shoppers-sample-burgers-made-of-buffalo-worms-idUSKBN1HS0JF

https://www.reuters.com/article/us-north-carolina-tarantula-burger/you-want-tarantula-with-that-at-u-s-burger-joint-its-an-option-idUSKBN1HO29S

https://spoonuniversity.com/place/us-restaurants-that-serve-insect-dishes

http://library.intellectualtakeout.org/content/quotes-united-states-national-debt-budget-deficits

Weekly Market Commentary – April 16, 2018

What do you think?

  • Are you bullish, bearish, or neutral about the U.S. stock market?
  • Are U.S. stocks undervalued, overvalued, or fairly valued?
  • What is the biggest threat the U.S. stock market faces this year?

During the first four months of 2018, U.S. stocks have experienced not one, but two, 10 percent declines. These short-term reversals are known as corrections. They occur relatively often, helping to wring out investor exuberance and, sometimes, to create buying opportunities as share prices drop.
The current twinset of corrections appears to have created a fair amount of uncertainty, according to Barron’s bi-annual Big Money Poll of professional investors. The ranks of the bullish have diminished, and the bearish remain relatively unchanged, but the number of those who are ‘neutral’ has swelled:

 

                       Fall 2017            Spring 2018

Bullish            61 percent           55 percent

Bearish          12 percent           11 percent

Neutral           27 percent           34 percent

Professional investors say their clients are also unsure about stock markets. They indicated 60 percent of clients were neutral about stocks, while 23 percent were bullish and 17 percent were bearish.

When asked about market valuations, a majority thought U.S. stocks were fairly valued (57 percent) after the corrections. Thirty-five percent believe stocks remain overvalued, and 8 percent believe stocks have become undervalued.   If either ‘political/policy missteps’ or ‘rising interest rates’ was your answer to the biggest threat to U.S. stocks, then you’re thinking like a professional investor. Their list of worries included:

Political/policy missteps             35 percent
Rising interest rates                   32 percent
Earnings disappointments            7 percent
Geopolitical crises                        7 percent

Last week, the Dow Jones Industrial Average gained 1.8 percent, the Standard & Poor’s 500 Index was up 2.0 percent, and the NASDAQ Composite rose 2.8 percent.

Data as of 4/13/181-WeekY-T-D1-Year3-Year5-Year10-Year
Standard & Poor’s 500 (Domestic Stocks)2.0%-0.7%14.1%8.3%11.3%7.2%
Dow Jones Global ex-U.S.1.2-0.216.43.44.30.6
10-year Treasury Note (Yield Only)2.8NA2.21.91.73.5
Gold (per ounce)0.93.64.63.9-0.83.8
Bloomberg Commodity Index2.71.33.5-3.4-7.2-8.2
DJ Equity All REIT Total Return Index-0.9-7.9-4.13.36.06.6

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.

 

what does your playlist say about you? Your preference for pop, country, opera, classic rock, or some other type of music may provide clues to your personality, according to an article in Psychological Science entitled ‘Musical Preferences Predict Personality.’

Psychologists have been studying ‘personality’ for a long time. Their goal is to understand why people think, feel, and behave differently in the same situation. The prevailing personality model is called the ‘Big Five.’ It holds there are five factors that describe a broad range of personality traits and characteristics. No single factor describes personality by itself:

  • Extroversion includes people on two ends of a spectrum, introverts and extroverts. Extroverts thrive on interactions with others while introverts thrive on solitude. This factor reflects a person’s tendency to be sociable, assertive, talkative, and friendly.
  • Agreeableness describes how well people get along well with others. This factor encompasses altruism, trust, tact, and loyalty.
  • Conscientiousness describes how well people control their impulses and act in socially acceptable ways. It encompasses persistence, ambition, energy, and resourcefulness.
  • Neuroticism describes how comfortable and confident people are with themselves. It encompasses awkwardness, pessimism, insecurity, and wariness.
  • Openness to experience describes willingness to try new experiences and think outside the box. This factor reflects perceptiveness, curiosity, insightfulness, and imagination.

As it turns out, musical preferences are pretty good predictors of some personality factors, especially openness, extroversion, and agreeableness. Openness is associated with a preference for ‘sophisticated’ music (classical, operatic, world, and jazz), extroversion is associated with ‘unpretentious’ music (country and folk), and, as you might expect, agreeableness is associated with liking all types of music.  It’s notable that musical preferences fail to predict conscientiousness.

Weekly Focus – Think About It
“Sometimes they would take two ropes and turn them as a single rope together, but you could separate them and turn them in like an eggbeater on each other. The skipping rope was like a steady timeline – tick, tick, tick, tick – upon which you can add rhymes and rhythms and chants. Those ropes created a space where we were able to contribute to something that was far greater than the neighborhood.”

–Kyra Gaunt, Professor, Songwriter, Performer

 

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 email with their email address and we will ask for their permission to be added.

 

Investment advice offered through Research Financial Strategies, a registered investment advisor.

*  This newsletter and commentary expressed should not be construed as investment advice.

* 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 indexes 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.

* Stock investing involves risk including loss of principal.

* Consult your financial professional before making any investment decision.

* To unsubscribe from the “Enter the name of your commentary” please click here or write us at “Your Address Here”.

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Sources:

https://www.investopedia.com/terms/c/correction.asp

https://www.barrons.com/articles/big-money-poll-more-good-news-for-stocks-1523665374

https://www.barrons.com/articles/dow-closes-the-week-up-427-pointsthe-hard-way-1523664000

https://www.researchgate.net/publication/322506461_Musical_Preferences_Predict_Personality_Evidence_from_Active_Listening_and_Facebook_Likes

https://positivepsychologyprogram.com/big-five-personality-theory/

https://www.ted.com/talks/kyra_gaunt_how_the_jump_rope_got_its_rhythm/transcript#t-84378

 

Weekly Market Commentary -April 9, 2018

You could almost hear the spurs jingling. 
Trade tensions ratcheted higher last week as the United States and China staked new positions on the not-so-dusty main street of trade. It was the latest round of posturing in what has the potential to become a trade war between the world’s largest economies. Barron’s explained:  “The trade battle has escalated since President Trump announced steel tariffs in March. China retaliated to those tariffs with its own duties, and the resulting back and forth resulted in announced tariffs on $50 billion worth of goods on both sides. Late on Thursday, Trump also directed the U.S. trade representative to identify $100 billion more in potential tariffs on Chinese goods.”

It was unwelcome news in financial markets where one-upmanship created uncertainty and unnerved investors. Distress in stock and bond markets may have been exacerbated by analysts’ warnings about worst-case scenarios, including the possibility of China reducing its $1.2 trillion position in U.S. Treasuries and diversifying its foreign exchange reserves into other nation’s currencies, according to Financial Times.  American manufacturing businesses have concerns about supply chain and other issues that may be created by tariffs, reported Forbes. In addition, farmers are bracing for the impact of a potential trade war. The New York Times wrote:  “China’s aggressive response to Mr. Trump’s tariffs is aimed squarely at products produced in the American heartland, a region that helped send him to the White House. A trade war with China could be particularly devastating to rural economies, especially for pig farmers and soybean and corn growers. Nearly two-thirds of United States soybean exports go to China.”

Major U.S. indices finished lower last week for the third time in four weeks. The Dow Jones Industrial Average was down 10.1 percent from its January closing high. Technically, that puts the Dow in correction territory.

Data as of 4/6/181-WeekY-T-D1-Year3-Year5-Year10-Year
Standard & Poor’s 500 (Domestic Stocks)-1.4%-2.6%10.5%7.6%10.8%6.6%
Dow Jones Global ex-U.S.0.1-1.414.73.54.10.2
10-year Treasury Note (Yield Only)2.8NA2.31.91.73.6
Gold (per ounce)0.62.76.33.2-3.33.7
Bloomberg Commodity Index-0.6-1.41.4-4.9-8.4-8.3
DJ Equity All REIT Total Return Index-0.4-7.0-2.22.36.06.2

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.

the not-so-secret march madness effect. Have you ever wondered how students select colleges? Economic theory suggests, “Models of college choice typically assume that high school students are fully informed and choose to apply to and eventually attend a school that maximizes their expected, present discounted value of future wages less the costs associated with college attendance.”  It’s a good theory, if you’re an economist who believes people act in perfectly rational ways. Of course, there aren’t many high school students (or parents) who can explain the present discounted value of something, much less use it as a tool to choose a college.  The filters on college search tools include criteria that may be more relevant to the decision. College Board’s BigFuture online interactive guide asks students to consider their test scores – as well as a college or university’s geography, size, type, cost, diversity, and support services – among other factors.

Those other factors include college sports. As it turns out, the success of a school’s sports teams plays a significant role in the college selection process for some students. The Journal of Sports Economics published ‘Understanding College Application Decisions: Why College Sports Success Matters.’ It’s the work of economists at the University of Chicago (UC) who found:

“A school that is invited to the NCAA basketball tournament can on average expect an increase in sent SAT scores in the range of 2 percent to 11 percent the following year depending on how far the team advances in the tournament. The top 20 football teams also can expect increases of between 2 percent and 12 percent the following year.”  Having a sports team make it to the Final Four is roughly equivalent to a college adjusting tuition or financial aid by 6 percent to 32 percent or moving halfway up the list on the U.S. News College Rankings, according to UC researchers.

Weekly Focus – Think About It
“They say that nobody is perfect. Then they tell you practice makes perfect. I wish they’d make up their minds.”
–Wilt Chamberlain, American basketball player

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 email with their email address and we will ask for their permission to be added.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

*  This newsletter and commentary expressed should not be construed as investment advice.

* 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 indexes 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.

* Stock investing involves risk including loss of principal.

* Consult your financial professional before making any investment decision.

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

 

Sources:

https://www.theguardian.com/world/2018/apr/05/china-us-win-concessions-tariff-war-trade-donald-trump-xi-jinping

https://www.barrons.com/articles/the-brewing-u-s-china-trade-war-explained-in-charts-1523052689

https://www.ft.com/content/df22be26-37fc-11e8-8eee-e06bde01c544

https://www.forbes.com/sites/stevebanker/2018/03/02/trumps-tariffs-trade-wars-and-the-supply-chain/#67740190729a

https://www.nytimes.com/2018/04/07/us/politics/trump-trade-china-politics-heartland.html

https://www.barrons.com/articles/tariff-fears-and-a-jobs-report-send-stocks-lower-1523066354

http://faculty.chicagobooth.edu/devin.pope/research/pdf/Website_Sports%20Econ%20Attention.pdf

https://bigfuture.collegeboard.org/college-search (Pages 107-108; 127; and 128)

http://bleacherreport.com/articles/57090

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