Peek of the Week
March 30, 2015
The Markets
So, when is the Federal Reserve going to increase the
rate for overnight borrowing?
It’s a question that has plagued bond investors
throughout the first quarter of 2015. In January, 10-year Treasury yields fell
as low as 1.6 percent. Early in March, they rose to about 2.2 percent before
falling back below 2.0 percent. The Financial
Times reported:
“Higher volatility is typical when markets are on the
cusp of a major turning point, and that has been the story so far this year for
U.S. Treasury debt… The year has already been characterized by big swings in
bond yields, which move inversely with prices… The lack of a clear signal over
when policy shifts towards a tightening phase may provide the central bank with
greater flexibility but does not quell the uncertainty facing investors.”
In recent weeks, Fed Chairwoman Janet Yellen indicated
the timing and pace of a rate change would be determined by economic data. In
general, the Fed considers a variety of employment and inflation measures when
determining policy. The Times
suggested bond markets have priced out the possibility of a June rate hike,
although several Federal Reserve officials recently said a June increase is
still under consideration.
U.S. stock markets reflected investor uncertainty last
week, too. Turmoil in the Middle East sparked concern an oil price reversal
could occur if supply is disrupted. In addition, investors worried
weaker-than-expected economic data might indicate U.S. economic growth was
slowing. The Commerce Department reported business investment spending plans
fell for the sixth straight month. That could result in reduced expectations
for first quarter growth, as well as delay a Fed rate increase. Stock markets
showed signs of life late in the week but finished lower.
Data as of 3/27/15
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
-2.2%
|
0.1%
|
11.5%
|
13.4%
|
11.9%
|
5.8%
|
|
10-year Treasury Note (Yield Only)
|
2.0
|
NA
|
2.7
|
2.2
|
3.9
|
4.6
|
|
Gold (per ounce)
|
1.1
|
-0.3
|
-7.7
|
-10.9
|
1.6
|
10.9
|
|
Bloomberg Commodity Index
|
-0.2
|
-4.8
|
-26.2
|
-11.6
|
-5.5
|
-4.6
|
|
DJ Equity All REIT Total Return
Index
|
-2.9
|
3.7
|
23.9
|
14.1
|
15.0
|
9.6
|
S&P 500, 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.
Your grandparents
and great-grandparents saw a lot of things change during their lifetimes… During the 20th century, the first Nobel
prizes were awarded. The first license plates were issued. The first World
Series was played. Americans lived through McCarthyism, the Great Depression,
and Orson Welles’ ‘The War of the Worlds’ broadcast. Rock and roll became
popular. The first theme parks opened, NASA was formed, and Earth Day was
introduced. Two World Wars were fought as well as the Vietnam, Korean, and Gulf
Wars. The Gold Standard ended and the tech revolution arrived.
Many of these events had immediate or eventual
implications for industries – automobiles, sports, communications,
entertainment, defense, technology, and others – as well as financial markets.
The last decade has seen some significant changes, too. Here are a few
milestones we’ve witnessed:
2006: The United States population passed 300 million. (100
million in 1915; 200 million in 1967)
2007: More babies were born in the United States than in
any other year in American history.
2008: Nielsen reported texting had become more popular than
calling.
2009: More people lived in urban areas than in rural areas
across the globe.
2010: This was the hottest year since 1880 – until the
record was broken again in 2014.
2011: Digital music sales overtook physical music sales for
the first time ever.
2012: China became the world’s biggest trading nation and
largest pork producer.
2013: The United States overtook the Saudis to become the
world’s biggest oil producer.
2014: China’s economy surpassed that of the United States.
2015: Millennials (born 1980 to late 1990s) became our
nation’s largest living generation.
When considering investment opportunities, it can be helpful
to ponder the ways in which demographic and economic shifts may affect the
future and what types of businesses may benefit (or not benefit) from the
changes.
Weekly Focus – Think About It
“Friendship is always a sweet
responsibility, never an opportunity.”
--Khalil Gibran,
Lebanese poet and writer
Best regards,
Leif M. Hagen
Leif
M. Hagen, CLU, ChFC
LP Financial Advisor
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Securities
offered through LPL Financial Inc., Member
FINRA/SIPC.
* 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.
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Sources:
