Peek of the Week
July 6, 2016
The Markets
Second quarter ended with a
spectacular finale of Brexit-inspired market volatility.
Investors typically welcome
sharp market movements with about the same level of enthusiasm that canines
show for fireworks. However, recent market agitations highlighted a key tenet
of investing: Volatility often creates opportunity. Following an initial Brexit
sell-off, global markets rebounded. Last Friday, Financial Times reported:
“Global equity indices continued their stunning post-Brexit
vote recovery, “core” government bond yields hovered near record lows, and
sterling stayed in sight of a three-decade trough against the dollar as a
tumultuous week in the markets drew to a close. The dollar finished the week on
a broadly softer note, helping gold stay in sight of the two-year high it
struck five days earlier. Oil prices were volatile but Brent regained the $50 a
barrel mark in late trade.”
During the first half of 2016,
opportunities weren’t always where investors might have expected to find them. Barron’s reported stocks have become
income providers and bonds have been delivering capital gains. “With dividends
included, the Standard & Poor’s 500 index returned 3.84 percent in the
year’s first six months, according to Bianco Research. Meanwhile, the
Treasury’s benchmark 10-year note returned roughly twice that, 7.97 percent...”
Some of the strongest stock
market performance was found in emerging markets. On July 1, MarketWatch reported the best and worst (in
italics) performing indices for the first
half of 2016:
·
Argentina (Merval) 25.77 percent
·
Russia (RTS Index) 22.95 percent
·
Brazil (Bovespa) 18.86
percent
·
Pakistan (KSE 100) 15.14 percent
·
Canada (S&P/TSX) 8.11 percent
·
China
(Shenzhen A Shares) -14.49 percent
·
China
(Shanghai A Shares) -17.22 percent
·
China (SSE
Composite) -17.22 percent
·
Japan
(Nikkei 225) -18.17
percent
·
Italy
(FTSE MIB) -24.37
percent
The three major Chinese indices
on the list serve as a reminder that, not too long ago, concerns about the
health of the global economy and the world’s financial markets focused on
China. Today, the stethoscope is pressed to the heart of the European Union.
Predictions of higher interest
rates in the United States have become a perennial that never blooms. Coming
into 2016, the Federal Reserve was expected to increase the fed funds rate four
times, making bonds appear an unwise investment choice. As mentioned, the
10-year Treasury note did just fine. However, the likelihood of the Fed raising
rates fell during the quarter. Barron’s
reported, “Based on Eurodollar futures prices, the U.S. central bank is likely
to keep its federal-funds target steady well into next year and perhaps until
2018.”
During the last week of June,
the Dow Jones Industrial Average and the Standard & Poor’s 500 Index each
experienced their best performance since November 2015, according to MarketWatch.
Data
as of 7/1/16
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500
(Domestic Stocks)
|
3.2%
|
2.9%
|
1.2%
|
9.2%
|
9.4%
|
5.1%
|
Dow Jones Global ex-U.S.
|
3.4
|
-1.7
|
-11.5
|
-0.7
|
-1.9
|
-0.4
|
10-year Treasury Note (Yield
Only)
|
1.5
|
NA
|
2.4
|
2.5
|
3.2
|
5.2
|
Gold (per ounce)
|
1.9
|
26.2
|
14.7
|
2.5
|
-2.0
|
8.0
|
Bloomberg Commodity Index
|
3.1
|
14.2
|
-11.7
|
-10.6
|
-10.6
|
-6.4
|
DJ Equity All REIT Total Return
Index
|
4.8
|
14.1
|
22.6
|
13.6
|
12.1
|
7.3
|
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.
where did your wealth come from? The 2016 U.S.
Trust Insights on Wealth and Worth Survey® asked wealthy
Americans about their financial success. They found a majority of wealthy
Americans did not inherit their wealth:(Page 4)
·
52 percent earned
their wealth through work or entrepreneurial efforts
·
32 percent gained
affluence through investing
·
10 percent inherited
their money
·
6 percent relied on
other means of accumulating wealth
The wealthy reported their parents emphasized the
importance of academic achievement (76 percent), financial discipline (68
percent), and hard work (63 percent).(Page 4)
In addition, they said it’s important to find ways to have
a positive impact on the world around them by volunteering their time (61
percent), giving money (74 percent), serving on boards (47 percent), and
working for non-profit organizations (16 percent).(Pages 5 & 16)
In fact, the popularity of impact investing is growing.
Wealthy Americans said investing for positive social impact is important
because:(Pages 16-17)
·
It’s the right thing
to do (54 percent)
·
Corporate America
should be accountable for its actions (53 percent)
·
I want to have a
positive impact on the world (49 percent)
·
Companies that are
good corporate citizens are less susceptible to business risk (40 percent)
·
Companies that are
good corporate citizens have better financial performance (38 percent)
The issues that were of greatest concern included:
environmental protection and sustainability; healthcare quality and access;
disease prevention, treatment, or cure; and education.(Page 15)
Weekly
Focus – Think About It
“Afoot and light-hearted I take to the open road,
Healthy, free, the world before me,
The long brown path before me leading wherever I choose.
Henceforth I ask not good-fortune, I myself am good-fortune,
Henceforth I whimper no more, postpone no more, need nothing,
Done with indoor complaints, libraries, querulous criticisms,
Strong and content I travel the open road…”
--Walt Whitman, American poet
Warm regards from Eagan,
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.
* To unsubscribe from the
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Sources:
http://www.ft.com/cms/s/0/695db2b6-3f3a-11e6-9f2c-36b487ebd80a.html#axzz4DGMPWq66 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-05-16_FinancialTimes-Stocks_March_On_in_Wake_of_Brexit_Vote-Footnote_1.pdf)
http://www.barrons.com/articles/markets-confound-in-years-first-half-1467433715?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-05-16_Barrons-Markets_Confound_in_Years_First_Half-Footnote_2.pdf)
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