March 14, 2016
The Markets
Stim-u-late mar-kets! Come on! It’s monetary easing.*
The European Central Bank (ECB)
was singing a tune that invigorated financial markets last week. The Wall Street Journal explained:
“The
fresh measures included cuts to all three of the ECB’s main interest rates, €20
billion a month of additional bond purchases atop the ECB’s current €60 billion
($67 billion) program, and an expansion of its quantitative easing program to
highly rated corporate bonds – all more aggressive steps than analysts had
anticipated. The central bank also announced a series of ultracheap four-year
loans to banks, some of which could be paid to borrow from the ECB.”
Most national indices in
Europe gained ground last week. The Financial Times Stock Exchange Milano
Italia Borsa (FTSE MIB), which measures the performance of the 40 most-traded
stocks on the Italian national stock exchange, was up almost 4 percent. Spain’s
Indice Bursatil Español Index (IBEX 35), which
is comprised of the most liquid stocks trading on the Spanish continuous
market, gained more than 3 percent. Major markets in the United States moved
higher, as well.
Of course, the harmony
provided by global oil markets proved pleasing to investors, too. An International
Energy Agency (IEA) report suggested more equitable supply and demand balances
could mean oil prices have bottomed out.
Barron’s
offered a word of caution, “Investors shouldn’t get too comfortable when it
seems that oil moves and central-bank maneuvers are the main reason stocks go
up or down, not earnings and economic growth.”
*Set to the tune of Kool
and the Gang’s ‘Celebration.’ You
know, “Cel-e-brate good times! Come on! It’s a celebration.”
Data as of 3/11/16
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard &
Poor's 500 (Domestic Stocks)
|
1.1%
|
-1.1%
|
-0.9%
|
9.1%
|
9.2%
|
4.7%
|
Dow Jones Global
ex-U.S.
|
1.1
|
-2.5
|
-9.6
|
-2.3
|
-1.6
|
1.3
|
10-year Treasury
Note (Yield Only)
|
2.0
|
NA
|
2.1
|
2.1
|
3.4
|
4.8
|
Gold (per ounce)
|
-1.0
|
19.1
|
10.0
|
-7.1
|
-2.2
|
8.8
|
Bloomberg Commodity Index
|
2.0
|
1.8
|
-19.6
|
-16.5
|
-13.3
|
-6.8
|
DJ Equity All REIT Total Return Index
|
1.7
|
1.7
|
4.7
|
9.0
|
11.0
|
6.4
|
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.
Here’s some Good
News: Healthcare spending is expected
to increase more slowly during 2016! It’s
projected to grow by 6.5 percent this year, according to a report from PWC. That’s still a lot faster than
inflation. The Economist projects overall
consumer prices in the United States will increase by 1.2 percent this year.
The report suggested several factors are contributing
to lower healthcare spending, including:
·
The Affordable Care Act’s Cadillac Tax. PWC reported the tax “…is motivating businesses to enact high cost-sharing. Their
workers are already responding to the higher deductibles by scrutinizing what
services are necessary and which are not…cost sharing can backfire if the
employee foregoes preventative care and faces years of chronic illness.”
Twenty-five percent of employers offer only high-deductible healthcare plans
for employees.
·
Virtual healthcare. Telemedicine appears to be the next big thing in medicine. Doctors
making house calls using real-time audio and video is the gold standard for
service, according to the Modern Medicine Network. Remote patient monitoring,
pre-recorded videos, and computer-assisted or message-based communications also
are being offered.
·
New health advisors. A new variety of healthcare company is making information about
facilities, providers, services, and pricing more accessible. In some cases,
financial incentives encourage employees to seek treatment at a preferred
facility.
These gains are more than offset by factors that are
pushing healthcare spending higher, including:
·
High-cost specialty drugs. PWC
reported specialty drugs are becoming a focus for the pharmaceutical industry. “With
700 specialty products currently in development, these investments will soon
surpass traditional drug investments…According to a recent Express Scripts
report, total national prescription spending increased 13.1 percent last year
to about $980 per person.”
·
Cyber security investments. Healthcare organizations are spending heavily on
cyber security to protect patients from data breaches. The cost of a breach is
about $200 per patient record. The cost of security is about $8 per patient
record.
It’s critical to factor healthcare spending into
retirement plans. In 2015, the Employee
Benefits Research Institute (EBRI) found a 65-year-old man needs $124,000
in savings and a 65-year-old woman needs $140,000 if each wants a 90 percent
chance of having enough money saved to cover healthcare expenses in retirement.
EBRI’s analysis did not include the
savings needed to cover long-term care expenses.
Weekly Focus –
Think About It
“Yesterday is not ours to
recover, but tomorrow is ours to win or lose.”
--Lyndon B. Johnson,
Former U.S. President
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://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_other (Click U.S. & Intl Recaps, then "Reaction
then overreaction," and scroll down to chart) (or
go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-14-16_Barrons-Global_Stock_Market_Recap-Footnote_2.pdf)
http://www.barrons.com/articles/stocks-up-1-1-as-oil-rises-europe-eases-1457760085?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-14-16_Barrons-Stocks_Up_1.1_Percent_as_Oil_Rises_Europe_Eases-Footnote_6.pdf)
http://www.economist.com/news/economic-and-financial-indicators/21694506-output-prices-and-jobs (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-14-16_TheEconomist-Output_Prices_and_Jobs-Footnote_8.pdf)
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