April 11, 2016
The Markets
We all learned a thing or two
about Panama last week.
The country is not the home of the Panama hat, which is
made in Ecuador. However, it is the only place in the world where you can watch
the sun rise on the Pacific Ocean and set on the Atlantic Ocean.
It’s also home to a lot of
offshore companies, according to the millions of records leaked from the
world’s fourth largest offshore law firm. The
Guardian reported 12 national leaders were among 143 politicians, athletes,
and wealthy individuals (including family members and associates) who were
participating in offshore tax havens.
It’s not illegal to hold
money in an offshore company, unless the company facilitates tax evasion or
money laundering, reported The New York
Times. Further investigation will be required to know whether that was the
case. CNBC suggested financial
markets could be affected if the findings lead to greater regulation of foreign
banks or prosecutorial action against them.
While the Panama scandal
captured a lot of attention, it didn’t have much of an impact on markets. News that
the U.S. Treasury was cracking down on corporate inversions, along with
indications the U.S. Federal Reserve may raise rates twice during 2016, caused
stocks to dip late in the week. Some major U.S. indices finished the week lower.
(Corporate inversions are mergers that give U.S. companies a foreign address
and lower their tax rates.)
We may be in for another
round of market volatility. Corporate earnings season is here. That’s the
period when publicly traded companies report how well they performed during the
previous quarter. CNBC said, “Over
the past 10 years, the emergence of first-quarter earnings reports has
generally corresponded with a rise in volatility.”
Data as of 4/8/16
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard &
Poor's 500 (Domestic Stocks)
|
-1.2%
|
0.2%
|
-1.7%
|
9.4%
|
9.0%
|
4.7%
|
Dow Jones Global
ex-U.S.
|
0.3
|
-2.5
|
-14.2
|
-1.5
|
-2.5
|
-0.7
|
10-year Treasury
Note (Yield Only)
|
1.7
|
NA
|
1.9
|
1.7
|
3.6
|
5.0
|
Gold (per ounce)
|
2.1
|
16.7
|
2.7
|
-7.7
|
-3.4
|
7.6
|
Bloomberg Commodity Index
|
1.4
|
0.6
|
-20.4
|
-16.2
|
-14.6
|
-7.3
|
DJ Equity All REIT Total Return Index
|
-0.4
|
5.7
|
4.3
|
8.7
|
11.9
|
7.0
|
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.
as carly simon
used to sing, “we can never know about the days to come…” However, that doesn’t stop anyone from making educated
guesses about the future of companies, financial markets, and economies. As we
enter the second quarter, investment and business professionals have been
offering their insights:
·
McKinsey & Company’s March Economic Conditions
Snapshot indicated 80 percent of
surveyed executives “…expect demand for their companies’ products and services
will grow or stay the same in the coming months, and a majority believe (as
they have in every survey since 2011) their companies’ profits will increase.”
However, they are not as optimistic about the global economy as they were in
December. About one-half of executives in developed and emerging markets said
economic conditions globally are worse than they were six months ago.
·
The Wall Street Journal’s April 2016 Economic
Forecasting Survey, which queries 60
economists, reported three-of-four survey participants expect a Fed rate hike
in June. Few expect a recession during the next 12 months, putting the odds at
19 percent. Almost one-half stated global risks were the greatest threat to the
U.S. economy, followed by financial conditions, a slowdown in consumer
spending, falling corporate profits, and U.S. politics.
·
PIMCO’s Cyclical Outlook predicts China’s gross domestic product (GDP) growth
may be in the 5.5 to 6.5 percent range. The target is 6.5 percent. In addition,
a gradual devaluation of the yuan is possible, although China’s currency policy
often produces unexpected twists and turns.
·
BlackRock Investment Institute’s second quarter outlook centered on three themes.
First, returns are likely to remain muted in the future. Second, monetary
policies appear to be less divergent, which could be a positive for some
markets. Third, volatility may persist as the Federal Reserve normalizes
monetary policy. Diversity and careful asset selection are likely to be
critical in this environment.
While it’s interesting to read experts’ predictions
and expectations for coming months and years, it’s important to remember forecasts
are not always accurate. An organization that tracked forecasting results
through 2012 found forecasts were correct about 47 percent of the time.
Weekly Focus –
Think About It
“Do
the right thing. It will gratify some people and astonish the rest.”
--Mark Twain, 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.
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Suite 203; Eagan, MN 55122.
Sources:
http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_hpp (Click on U.S.
& Intl Recaps, then “Jittery investors”)
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Published on
4/11/16, 12:17 PM
Central Standard Time
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