Peek of the Week
March 21, 2016
There
is ongoing debate about whether markets behave in rational ways.
The
efficient market hypothesis suggests it’s impossible to outperform the stock
market because current share prices reflect all relevant information. In other
words, stocks should always trade at
fair value and it should be impossible to invest in a stock that is overpriced
or underpriced.
. The first is market bubbles, “where entire
markets get out of whack with traditional valuation measures and then
collapse.” The other is pricing anomalies. For instance, value stocks are
inexpensive relative to their asset values and tend to outperform over the long
term. In a perfect market, pricing anomalies shouldn’t occur.
During
the past few weeks, U.S. stock markets have recovered from losses suffered
earlier in the year and moved into positive territory for 2016. The shift into
positive territory has some suggesting markets may not be correctly priced, but
there is disagreement about whether it currently is overvalued or undervalued.
According
to Barron’s, the recent strong
performance of U.S. stock markets hasn’t been inspired by sound decisions and
rational economic behavior. “The market’s valuation, at 17 times consensus
analyst earnings-per-share estimates for 2016, looks stretched again, given
that easy monetary policy and rising oil prices – not earnings growth – are
responsible.”
Wharton
Professor of Finance Jeremy Siegel disagreed. “On an absolute basis [the stock
market is] slightly more highly valued than average but relative to interest
rates, which are extremely low, it is actually undervalued in my opinion.”
Investors
who believe markets perform well most of the time, but not all of the time, may
want to take opportunities like these to look for companies whose shares may be
mispriced, as well.
Data as of 3/18/16
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500 (Domestic Stocks)
|
1.4%
|
0.3%
|
-2.4%
|
9.7%
|
9.9%
|
4.6%
|
Dow Jones Global ex-U.S.
|
1.6
|
-1.0
|
-11.0
|
-1.6
|
-0.9
|
-0.3
|
10-year Treasury Note (Yield Only)
|
1.9
|
NA
|
2.0
|
2.0
|
3.3
|
4.7
|
Gold (per ounce)
|
-1.0
|
17.9
|
9.1
|
-7.9
|
-2.5
|
8.5
|
Bloomberg Commodity Index
|
1.0
|
2.8
|
-17.8
|
-16.3
|
-13.3
|
-6.6
|
DJ Equity All REIT Total Return
Index
|
2.2
|
4.0
|
2.4
|
9.8
|
11.8
|
6.3
|
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.
Here’s a
milestone you don’t reach until your seventies. The major milestones of older Americans are not
attended with the same sense of wonder that accompanies the major milestones of
younger Americans. Sure, registering for Social Security benefits and signing
up for Medicare are rites of passage, but they don’t hold a candle to earning your
driver’s license, receiving your first kiss, winning your first promotion, or
dancing at your wedding.
If you have retirement accounts when you become a
septuagenarian, then you’ll encounter a milestone the Internal Revenue Service
(IRS) strongly encourages you to remember. Beginning April 1 of the year
following the year in which you reach age 70½, you must begin taking required
minimum distributions (RMDs) from most of your retirement accounts. Forbes offered this list:
- Traditional IRAs
- Rollover IRAs
- Inherited IRAs
- SEP IRAs
- SIMPLE IRAs
- 401(k), 403(b), and 457(b) plan accounts
- Keogh plans
There currently are no RMDs for Roth IRAs, unless the
accounts were inherited.
If you have more than one qualifying retirement
account, then a separate RMD must be calculated for each account. If you want to
withdraw a portion of each account, you can, but it may prove simpler to take
the entire amount due from a single account. Once you start, you must take RMDs
by December 31 every year. If you don’t, you’ll owe some hefty penalty taxes.
The IRS offers some instructions for calculating the
RMD due. “The required minimum distribution for any year is the account balance
as of the end of the immediately preceding calendar year divided by a distribution
period from the IRS’ “Uniform Lifetime Table.” A separate table is used if the
sole beneficiary is the owner’s spouse who is ten or more years younger than
the owner.”
If you would prefer to have some help figuring out the
correct amount when RMDs are due, contact your financial professional.
Weekly
Focus – Think About It
“It wasn't by accident that
the Gettysburg address was so short. The laws of prose writing are as immutable
as those of flight, of mathematics, of physics.”
--Ernest
Hemingway, American writer
Best
regards,
Leif M. Hagen
Leif M. Hagen, CLU, ChFC
LP Financial Advisor
Securities offered through LPL Financial Inc.,
Member
FINRA/SIPC.
P.S. Please feel free to forward this commentary
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If you would like us to add
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P.S.S. Also,
please remind your friends and family members becoming Medicare eligible that
we offer Medicare insurance and Part D options with NO COST to work with Leif as
their agent
For more information and resources visit our website at www.HagenFN.com
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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
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Sources:
http://www.economist.com/blogs/buttonwood/2014/03/equity-markets (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-21-16_TheEconomist-Rational_or_Not-Footnote_2.pdf)
http://www.barrons.com/articles/stocks-rise-more-than-1-now-in-the-black-for-2016t-1458360051?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-21-16_Barrons-Stocks_Rise_More_than_1_Percent-Now_in_the_Black_for_2016-Footnote_3.pdf)
https://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Required-Minimum-Distributions (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-21-16_IRS-Required_Minimum_Distributions-Footnote_7.pdf)
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