PEEK OF THE WEEK
November 14, 2016
Leif Hagen & Donna Roberts
The Markets
Surprise!
Markets were remarkably sanguine following the election
of Donald Trump to the presidency of the United States.
There was a moment of panic. As election results rolled
in on Tuesday, Gold prices rose and Treasury yields fell, as investors sought
safe havens. Dow Futures, a measure of overnight sentiment, fell by 4 percent,
and Standard & Poor’s 500 futures dropped 5 percent. (When index futures
trade lower before the market opens, it is an indication investors expect the
actual index to trade lower when the market opens.)
The
losses triggered market circuit breakers, forcing investors to take a moment.
They listened to President-elect Trump’s conciliatory acceptance speech,
reassessed the political and economic landscape, and liked what they saw,
according to Barron’s. Financial Times offered this assessment:
“Fear
and loathing was the overriding sentiment of fund managers and analysts
contemplating the market implications of an unlikely Donald Trump
presidency…But when confronted by the reality of his election win, stock
investors swiftly switched back to their more natural state of optimism,
focusing on the prospect of growth-boosting stimulus, tax cuts and tax reform,
and the rollback of industry-inhibiting regulation. Simultaneously, bad
policies were dismissed as campaign rhetoric.”
Bond markets weren’t enthusiastic about the
President-elect’s fiscal stimulus plans. Barron’s
reported:
“The 30-year bond climbed 0.3 percentage point to 2.94
percent, resulting in a 6.3 percent decline in price. (Bond prices move
inversely to yields.)…It wasn’t just Treasuries. Municipal bonds, corporate
bonds, and preferred securities all fell. Bloomberg estimates $1 trillion in
the value of bonds evaporated last week after the election.”
There was speculation Mr. Trump’s win would cause the
Federal Reserve to delay the next rate hike. However, in a speech on Friday,
Federal Reserve Vice Chairman Stanley Fisher said the Fed seems reasonably
close to achieving its inflation and employment targets. “Accordingly, the case
for removing accommodation gradually is quite strong, keeping in mind that the
future is uncertain and that monetary policy is not on a preset course.” It appears
rates may move higher in December.
Data as of 11/11/16
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500
(Domestic Stocks)
|
3.8%
|
5.9%
|
4.3%
|
6.9%
|
11.4%
|
4.6%
|
Dow Jones Global ex-U.S.
|
-0.9
|
-0.6
|
-2.7
|
-3.5
|
1.6
|
-1.0
|
10-year Treasury Note (Yield
Only)
|
2.1
|
NA
|
2.3
|
2.8
|
2.1
|
4.6
|
Gold (per ounce)
|
-5.1
|
16.4
|
13.9
|
-1.2
|
-7.0
|
-7.1
|
Bloomberg Commodity Index
|
0.1
|
6.1
|
-0.3
|
-12.3
|
-11.0
|
-6.7
|
DJ Equity All REIT Total
Return Index
|
-0.9
|
2.0
|
5.5
|
10.0
|
11.0
|
5.0
|
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.
it’s just not easy to do. Brexit
came as a shock to many. So did the outcome of the U.S. election, but let’s
face it – whether you’re trying to evaluate the potential of a company or the
future of a country – predicting what may be ahead is never easy.
For
instance, back in 1901, John Elfreth Watkins conferred
with the “the wisest and most careful men in our greatest institutions of
science and learning” to determine what might happen during the next 100 years.
His predictions weren’t all accurate, but some were quite insightful:
“There will probably be from 350,000,000 to
500,000,000 people in America and its possessions...Nicaragua will ask for
admission to our Union after the completion of the great canal. Mexico will be
next. Europe, seeking more territory to the south of us, will cause many of the
South and Central American republics to be voted into the Union by their own
people.”
“The American will be taller by one to two
inches. His increase in stature will result from better health, due to vast
reforms in medicine sanitation, food, and athletics. He will live fifty years
instead of thirty-five as at present – for he will reside in the suburbs.”
“Hot or cold air will be turned on from
spigots to regulate the temperature of a house as we now turn on hot or cold
water from spigots to regulate the temperature of the bath…”
“There will be no street cars in our large
cities. All hurry traffic will be below or high above ground when brought
within city limits...These underground or overhead streets will teem with
capacious automobile passenger coaches and freight wagons, with cushioned
wheels…Cities, therefore, will be free from all noises.”
“Wireless telephone and telegraph circuits
will span the world. A husband in the middle of the Atlantic will be able to
converse with his wife sitting in her boudoir in Chicago. We will be able to
telephone to China quite as readily as we now talk from New York to Brooklyn.”
The future is always ripe with possibility.
Weekly Focus – Think About It
“Yesterday is not ours to
recover, but tomorrow is ours to win or lose.”
--Lyndon B. Johnson, 36th
President of the United States
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.
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Sources:
http://www.barrons.com/articles/trump-agenda-could-promote-economic-growth-1478931198?mod=BOL_hp_highlight_1 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/11-14-16_Barrons-Trump_Agenda_Could_Promote_Economic_Growth-Footnote_2.pdf)
https://www.ft.com/content/a606181e-a7fb-11e6-8b69-02899e8bd9d1 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/11-14-16_FinancialTimes-Markets_Indulge_in_Make-Believe_Over_a_Trump_Presidency-Footnote_5.pdf)
http://www.barrons.com/articles/moves-to-make-as-the-bond-market-sinks-1478931249 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/11-14-16_Barrons-Moves_to_Make_as_the_Bond_Market_Sinks-Footnote_6.pdf)
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