August 18, 2015
The Markets
Stock markets
in the United States got off to a good start last week, heading higher before
stumbling over China’s currency news.
China, which
has one of the world’s largest and fastest growing economies, is experiencing a
slowdown in economic growth. The
Economist reported data released last week showed, “…an 8 percent fall in
Chinese exports in July and a 5.4 percent drop in factory-gate prices. Output
prices have fallen for 41 straight months, a symptom of overcapacity in much of
China’s heavy industry.” MarketWatch
suggested China may be in (or on the verge of) recession.
In an effort
to slow its slowdown, China announced an unexpected devaluation of its
currency, the renminbi, last week. Don’t confuse the terms renminbi and yuan.
Renminbi is the name of China’s currency. Yuan describes a unit of that
currency. For instance, when shopping in China, you would not ask how many
renminbi you owed, you would ask how many yuan you owed.
Barron’s questioned
whether China’s relatively small currency adjustment would be enough to help its
economy and speculated last week’s devaluation could be the tip of the iceberg:
“One wonders
what a 3 percent adjustment in the yuan will do to spur China’s economy… To a
longtime observer of finance ministers and central bankers, the claim that the
initial moves to tweak currencies will suffice is a familiar refrain. The
larger the underlying imbalance, the larger the eventual exchange-rate
adjustment.”
A Fed
spokesman told The Wall Street Journal
China’s new currency policy has significant implications for the world economy
and it probably won’t affect the Fed’s impending rate hike.
The currency
devaluation didn’t have a sustained affect on U.S. stock markets last week. Major
U.S. stock markets finished the week higher. China’s benchmark national index
was up for the week, too.
Data as of 8/14/15
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500 (Domestic Stocks)
|
0.7%
|
1.6%
|
7.0%
|
14.2%
|
14.2%
|
5.4%
|
Dow Jones Global ex-U.S.
|
-1.5
|
0.1
|
-7.6
|
5.1
|
3.3
|
2.1
|
10-year Treasury Note (Yield Only)
|
2.2
|
NA
|
2.4
|
1.7
|
2.6
|
4.3
|
Gold (per ounce)
|
2.3
|
-6.8
|
-14.9
|
-11.2
|
-7.8
|
9.7
|
Bloomberg
Commodity Index
|
-0.1
|
-13.4
|
-28.1
|
-14.0
|
-7.3
|
-5.8
|
DJ Equity
All REIT Total Return Index
|
1.5
|
0.6
|
8.5
|
11.1
|
14.0
|
7.5
|
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 the future hold? It’s not stuff most of us think
about every day, but we may soon be a lot more familiar with terms like brain
organoids, megascale desalination, Internet balloons, liquid biopsies, and
more. At least, that’s what the MIT
Technology Review reported in Breakthrough
Technologies 2015:
“Not all breakthroughs are created equal. Some arrive
more or less as usable things; others mainly set the stage for innovations that
emerge later, and we have to estimate when that will be. But we’d bet that every
one of the milestones on this list will be worth following in the coming years.”
Here
are a few of the items included on the list:
·
Brain organoids: In greatly oversimplified terms, these are miniature brains that can
be grown from an adult’s cells. They may help researchers better understand
brain disorders and develop effective treatments.
·
Megascale desalinization: The world does not have enough fresh water. One
solution is seawater desalination. Thanks to engineering improvements,
reverse-osmosis desalination has become cost-effective.
·
Internet balloons: Imagine 15-meter helium balloons with solar-powered electronics
hovering 20 kilometers in the air (far above commercial airline flights) and making
the Internet available to people who currently have no access.
·
Liquid biopsies: Someday soon, annual blood tests may help diagnose cancer early. Gene
sequencing machines decode millions of fragments of DNA in the bloodstream,
looking for specific DNA patterns that indicate cancer. Knowing the DNA
mutation behind a cancer may also help physicians choose the most effective
treatments.
It’s
important to keep track of developing technologies because they have the
potential to disrupt industries and change the way business is done.
Weekly Focus – Think About It
“Any sufficiently advanced technology is
indistinguishable from magic.”
--Arthur C. Clarke, British science fiction
writer
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.
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Sources:
http://www.economist.com/news/leaders/21660979-emerging-markets-are-being-squeezed-americas-recovery-and-chinas-slowdown-stuck-middle (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/08-17-15_TheEconomist-Stuck_in_the_Middle-Footnote_1.pdf)
http://online.barrons.com/articles/chinas-yuan-could-fall-10-or-more-1439617207?tesla=y&mod=BOL_twm_ls?mod=BOL_hp_highlight_1&cb=logged0.7030657494906336 (or
go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/08-17-15_Barrons-Chinas_Yuan_Could_Fall_10_Percent_or_More-Footnote_6.pdf)
http://www.wsj.com/articles/dudley-monetary-policy-alone-cant-solve-labor-market-structural-imbalances-1439382731 (or
go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/08-17-15_WSJ-Dudley-China_Moves_Have_Huge_Implications_but_Fed_Appears_on_Track-Footnote_7.pdf)
http://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_hpp (Click on U.S.
& Intl Recaps, International Perspective, "A mid-August jolt", scroll down to the Global Stock Market
Recap chart) (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/08-17-15_Barrons-Global_Stock_Market_Recap-Footnote_8.pdf)
