PEEK OF THE WEEK
February 13, 2017
Leif Hagen & Donna Roberts
The Markets
What’s the
word ‘phenomenal’ worth? It all depends on who says it.
Barron’s shared Wilshire
Associates’ calculations which indicated the word was worth about $175
billion – the amount markets gained last Thursday – when President Trump used
it to describe the tax plan his administration will deliver “ahead of
schedule.” Markets gained another $100 billion in value on Friday. Barron’s reported:
“While tax reform is definitely
coming, a final bill is still a long way off, and a 2017 effective date is
looking less likely…Yet, as the action late last week suggests, the equity
markets are more than willing to give the new administration the benefit of the
doubt. Something’s coming, even if we don’t know what or when. And that seems
good enough to bid stocks higher…”
The word ‘phenomenal’ is
probably worth a bit less than Wilshire’s
estimate. United States stocks pushed higher on positive earnings growth, too.
With 71 percent of companies in the Standard & Poor’s 500 Index reporting
results for the fourth quarter of 2016, “…the blended earnings growth rate for
the S&P 500 is 5.0 percent. The fourth quarter will mark the first time the
index has seen year-over-year growth in earnings for two consecutive quarters
since Q4 2014 and Q1 2015.”
Consumer confidence remained
high, but wavered a bit in February, according to the University of Michigan Surveys of Consumers. Americans are happy
with their current financial circumstances, but expectations for the future
dropped sharply. Surveys of Consumers chief economist, Richard Curtin, wrote:
“… a total of nearly six-in-ten
consumers made a positive or negative mention of government policies. In the
long history of the surveys, this total had never reached even half that
amount…These differences are troublesome: the Democrat’s Expectations Index is
close to its historic low (indicating recession) and the Republican’s Expectations
Index is near its historic high (indicating expansion). While currently
distorted by partisanship, the best bet is that the gap will narrow to match a
more moderate pace of growth.”
This week could be bumpy. On
Valentine’s Day, Fed Chair Janet Yellen will testify about the state of the
economy before the U.S. Senate.
Data as of 2/10/17
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500
(Domestic Stocks)
|
0.8%
|
3.5%
|
25.1%
|
8.8%
|
11.5%
|
4.9%
|
|
Dow Jones Global ex-U.S.
|
0.4
|
4.7
|
19.2
|
-1.0
|
2.0
|
-1.0
|
|
10-year Treasury Note (Yield
Only)
|
2.4
|
NA
|
1.7
|
2.7
|
2.0
|
4.8
|
|
Gold (per ounce)
|
1.1
|
6.0
|
3.2
|
-1.3
|
-6.4
|
6.3
|
|
Bloomberg Commodity Index
|
1.6
|
2.1
|
20.9
|
-11.3
|
-9.2
|
-5.9
|
|
DJ Equity All REIT Total
Return Index
|
1.1
|
1.9
|
22.4
|
11.6
|
10.9
|
4.3
|
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.
on the road to brexit…Last week, Members
of Parliament (MPs) approved the Article 50 bill, green-lighting Britain’s exit
from the European Union (EU). If the House of Lords follows suit, which is far
from certain, then the British government will follow the lead of the British
people and invoke Article 50 of the Lisbon Treaty. (Article 50 gives member
states the right to withdraw from the EU.)
The Economist reported:
“But a different sort of Brexit
bill is approaching and will be harder to manage. It could yet scupper the
whole process. Leave campaigners promised voters that Brexit would save the
taxpayer £350m ($440m) a week. That pledge was always tendentious. But
officials in Brussels are drawing up a bill for departure that could mean
Britain’s contributions remain close to its membership dues for several years
after it leaves. In a new report for the Centre for European Reform, a
think-tank, Alex Barker, a Financial Times correspondent, puts the figure at
anything between €24.5bn ($26.1bn) and €72.8bn.”
Michel Barnier, the EU’s chief
Brexit negotiator, indicated the matter of how much Britain owes must be
settled before questions about Britain’s future relationship (i.e., trade
agreements) with the EU can be addressed, according to Bloomberg.
To date, Prime Minister Theresa
May has been taking a hard line, which has roiled tempers throughout the EU. Bloomberg reported the Prime Minister’s
comments:
“…are elevating the likelihood that
the United Kingdom leaves the bloc in 2019 without an exit deal, let alone the
sweeping trade pact it seeks…The messages from the diplomats are that EU
governments are preparing to enforce their line that the United Kingdom can’t
be better off outside the bloc than inside it and that they value safeguarding
their own interests and regional stability above the need to maintain good
relations with the United Kingdom.”
The pending negotiations bring
to mind the words of German Field Marshal Helmut Von Moltke, “No operation
extends with any certainty beyond the first encounter with the main body of the
enemy.”
Weekly Focus – Think About It
“What counts for most people in
investing is not how much they know, but rather how realistically they define
what they don't know.”
--Warren Buffett, The Oracle of Omaha
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://www.barrons.com/articles/magical-mystery-tax-plan-1486794351?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-13-17_Barrons-Magical_Mystery_Tax_Plan-Footnote_1.pdf)
http://www.sca.isr.umich.edu (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-13-17_UniversityofMichigan-Surveys_of_Consumers-Footnote_3.pdf)
http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_hps (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-13-17_Barrons-Yellen_to_Give_Semiannual_Monetary_Policy_Testimony-Footnote_4.pdf)
https://www.ft.com/content/7c25dd1c-ee1f-11e6-930f-061b01e23655 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-13-17_FinancialTimes-MPs_Give_Green_Light_for_Theresa_May_to_Trigger_Brexit-Footnote_5.pdf)
http://www.economist.com/news/britain/21716629-bitter-argument-over-money-looms-multi-billion-euro-exit-charge-could-sink-brexit?cid1=cust/ddnew/n/n/n/2017029n/owned/n/n/nwl/n/n/NA/email (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-13-17_TheEconomist-The_Multi-Billion-Euro_Exit_Charge_that_Could_Sink_Brexit_Talks-Footnote_7.pdf)
