Hagen Financial Network, Inc.: May 2017

Tuesday, May 30, 2017

Now or in the future?

PEEK OF THE WEEK

May 30, 2017

Leif Hagen & Donna Roberts

The Markets

Is preparing for the future more important than enjoying the present?

There is a lot to enjoy today. Last week, Financial Times wrote:

“Wall Street ended an impressive week on a steady note – eking out a tiny gain to a fresh record close – as oil prices recouped some of the previous day’s steep losses and the latest U.S. Gross Domestic Product data reinforced expectations for a June rate rise.”

In fact, U.S. equities have been performing well for some time. The Standard & Poor’s (S&P) 500 Index achieved new highs 18 times during 2016 and, so far in 2017, we’ve scored 20 closing highs, including three last week.

While it’s important to enjoy current gains in U.S. stock markets, it’s equally important to prepare for the future. Bull markets don’t continue forever. They often experience corrections. A correction during a bull market is a 10 percent decline in the value of a stock, bond, or another investment. Often, corrections are temporary adjustments followed by additional market gains, but they can be a signal a bear market or recession is ahead.

One investment professional cited by CNBC believes a correction may occur soon. “Gundlach expects the 10-year Treasury yield to move higher, and a summer interest rate rise should ‘go along with a correction in the stock market.’”

Barron’s cautioned strong employment numbers also may signal a downturn is ahead:

“Think about it: Jobs are a classic lagging indicator, and bouts of high unemployment and economic distress are often accompanied by falling stocks. By the time the economy improves enough to enjoy full employment, share prices will reflect that rosier outlook. That’s not to say stocks can’t do well following periods of full employment…Unemployment was 2.5 percent in 1953, and yet the market delivered big gains over the next seven years. But stocks happened to be very cheap in 1953, with a cyclically adjusted price-to-earnings ratio of just 11.6 times…That valuation is now pushing 29 times.”

There is no way to know when a correction or market downturn may occur, but if history proves out, one is likely at some point in the future.

Data as of 5/26/17	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	1.4%	7.9%	15.6%	8.1%	12.6%	4.8%
Dow Jones Global ex-U.S.	0.7	12.6	15.4	-0.6	5.8	-1.0
10-year Treasury Note (Yield Only)	2.3	NA	1.8	2.5	1.7	4.9
Gold (per ounce)	1.0	9.1	3.4	-0.3	-4.3	6.7
Bloomberg Commodity Index	-0.8	-4.0	1.6	-14.6	-8.5	-6.8
DJ Equity All REIT Total Return Index	0.7	3.4	6.1	8.9	10.5	5.3

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 americans vacation avoiders? Project: Time Off reports Americans spent 16.8 days on vacation during 2016, on average. That was an improvement from 2015, when the average was 16.2, but it was well below the 20.3 days a year spent on holiday from 1978 through 2000.

The shortening of American vacations owes something to both fear and ambition, according to Project: Time Off:

“Americans are still worried about job security when it comes to taking time off. More than a quarter (26 percent) say they fear that taking vacation could make them appear less dedicated at work, just under a quarter (23 percent) say they do not want to be seen as replaceable, and more than a fifth (21 percent) say they worry they would lose consideration for a raise or promotion.”

While waiving a few vacation days may impress the boss, there are some significant economic consequences. For instance:

· Forfeiting 206 million vacation days in 2016 cost employees $66.4 billion in aggregate and about $604 individually.

· The increase in vacation day usage from 2016 to 2017 contributed $37 billion to the U.S. economy, helped create 278,000 jobs, and generated $11 billion in additional income across the country.

As it turns out, gender and job title are good predictors of the likelihood vacation days will remain unused. Last year, men were more likely than women to use all of their vacation days, even though women were more likely to say that vacation was extremely important.

The same was true of senior management. Company leaders believe corporate culture encourages vacation and often hear about the value of taking vacation, but are unlikely to use all of their vacations days.

Weekly Focus – Think About It

“The only people for me are the mad ones, the ones who are mad to live, mad to talk, mad to be saved, desirous of everything at the same time, the ones who never yawn or say a commonplace thing, but burn, burn, burn like fabulous yellow roman candles exploding like spiders across the stars.”

--Jack Kerouac, American author

Best Regards,

Leif M. Hagen

Leif M. Hagen, CLU, ChFC

LP Financial Advisor

Securities offered through LPL Financial Inc., Member FINRA/SIPC.

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

* 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.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees,

expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* 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 “Peek of the Week”, please reply to this email with “Unsubscribe” in the subject line, or write us at: Hagen Financial Network, Inc. 4640 Nicols Road, Suite 203; Eagan, MN 55122.

Sources:

https://www.ft.com/content/46aca00c-41b8-11e7-9d56-25f963e998b2 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-30-17_FinancialTimes-S%26P_500_Inches_Up_to_Fresh_Record_Close-Footnote_1.pdf)

https://www.ft.com/content/7a71ac6c-ae8b-3df0-8b7b-5de3ee9ff949 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-30-17_FinancialTimes-S%26P_500_Closes_at_Record_High_for_Third_Straight_Day-Footnote_2.pdf)

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

http://www.cnbc.com/2017/05/02/jeff-gundlach-sees-summer-correction-in-the-stock-market.html

http://www.barrons.com/articles/theres-something-manic-about-this-market-1495858813?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-30-17_Barrons-Theres_Something_Manic_About_This_Market-Footnote_5.pdf)

http://www.projecttimeoff.com/state-american-vacation-2017

http://www.projecttimeoff.com/news/press-releases/american-vacation-usage-rises-dramatically-study-finds

http://www.shortlist.com/entertainment/books/the-40-most-powerful-literary-quotes#gallery-5

Monday, May 15, 2017

American & foreign stock markets on the rise…

PEEK OF THE WEEK

MAY 15, 2017

Leif Hagen & Donna Roberts

The Markets

Does performance tell the whole story?

American stock markets have delivered some exceptional performance in recent years. Just look at the Standard & Poor’s 500 (S&P 500) Index. Barron’s reported the S&P 500, including reinvested dividends, has returned 215 percent since April 30, 2009. The index is currently trading 50 percent above its 2007 high.

The rest of the world’s stocks, as measured by the MSCI EAFE Index, which includes stocks from developed countries in Europe, Australia, and the Far East, returned 97 percent in U.S. dollars during the same period. At the end of April, the MSCI EAFE Index was 20 percent below its 2007 high.

If you subscribe to the ‘buy low, sell high’ philosophy of investing then these performance numbers may have you thinking about portfolio reallocation. However, performance doesn’t tell the full story.

For example, there’s a significant difference between the types of companies included in the two indices. At the end of April, Information Technology stocks comprised 22.5 percent of the S&P 500 Index and just 5.7 percent of the MSCI EAFE Index. Financial stocks accounted for 14.1 percent of the S&P 500 and 21.4 percent of MSCI EAFE.

It’s important to dig beneath the surface and understand the drivers behind performance before making assumptions or changing portfolio allocations.

Even so, European stocks have the potential to deliver decent performance this year, according to Barron’s. “The case for a revival in European stocks, particularly the Continent’s many multinationals, rests in large part on expectations for improving global growth…This year Europe’s GDP is expected to increase by about 2 percent, after growing 1.7 percent in 2016 – better than the U.S.’s 1.6 percent.”

Last week, the S&P 500 Index moved slightly lower.

Data as of 5/12/17	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	-0.4%	6.8%	15.8%	8.0%	12.3%	4.8%
Dow Jones Global ex-U.S.	0.6	11.4	15.6	-0.6	4.9	-1.1
10-year Treasury Note (Yield Only)	2.3	NA	1.8	2.5	1.8	4.7
Gold (per ounce)	0.3	6.2	-3.8	-1.8	-4.6	6.3
Bloomberg Commodity Index	1.0	-4.6	-1.5	-15.0	-8.9	-7.0
DJ Equity All REIT Total Return Index	-1.4	1.2	1.9	8.2	9.7	4.9

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 herd of unicorns is growing. Since 1996, the value of companies listed on American stock exchanges has increased from 105 percent of gross domestic product (GDP) to 136 percent of GDP, according to The Economist. (GDP is the value of all goods and services produced in the United States.)

During the same period, the number of companies listed on American exchanges has fallen from 7,322 to 3,671.

This fact might lead you to surmise that a few businesses have become dominant in their industries, but that’s not the case. Many companies are choosing to remain private rather than issue shares through an Initial Public Offering (IPO) and then trade on an exchange. Financial Times explained:

“Over the past 10 years the number of initial public offerings in the United States, and the total amount of equity raised by them, are way down on historical averages. If these had held there would have been more than 3,000 new public companies in the past decade. Instead, we have had fewer than half the number of IPOs.”

Why don’t the leaders of vibrant young companies want to issue shares? There may be several reasons:

· Technology-intensive businesses may need less capital.

· It’s relatively easy to raise money in private equity markets.

· Regulatory requirements for public companies increase litigation risk from securities class actions.

· Private markets are better at allowing companies to take a long-term perspective.

The reluctance to take companies public has fattened the world’s herd of unicorns – private firms worth over $1 billion that are not subject to public-company standards for accounting and disclosure. There are currently about 100 of them.

Weekly Focus – Think About It

“It may be possible to gild pure gold, but who can make his mother more beautiful?”

--Mahatma Gandhi, Leader, Indian independence movement

Best Regards,