PEEK OF THE WEEK
February 27, 2017
Leif Hagen & Donna Roberts
The Markets
Once upon a time, five blind men
discovered an elephant. Each man examined a different part of the elephant and
formed a unique impression about the animal. One believed an elephant was like
a pillar, while another decided an elephant was like a snake.
In recent
weeks, stock and bond markets have been telling different stories, too.
Following a rally on Friday, the
Dow Jones Industrial Average finished at a record high for the 11th
time last week. Reuters reported
major U.S. benchmark indices have been driven higher by optimism about tax
reform, eased regulation, and increased infrastructure spending.
Both Reuters and Financial Times
wrote some investors have become more cautious amidst growing doubts about the
pace at which the new administration’s economic policies may be achieved, as
well as concerns about the outcome of European elections. These concerns are
reflected in the bond market. Barron’s
reported:
“The market’s recent advance has
taken place on expectations of the reflationary impact of the Trump
administration’s policies…the action in global bond markets suggests something
else. The 10-year U.S. Treasury yield ended the week at 2.317 percent, the
lowest since late November, despite the reflation trade in stocks and
expectations of a Fed hike by June, if not May. Even more startling was the
slide in the German two-year yield, to minus 0.95 percent, by week’s end, close
to a record low, amid growing concern about France’s coming presidential
election. While stock investors are smiling at daily Dow records, the bond
crowd seems to be hunkering down.”
Who is correct? As with the folk
tale about the elephant, both stock and bond markets may be right. Fiscal
stimulus could boost economic growth, supporting higher stock values. However,
the positive effects of a potential stimulus package are unlikely to be felt
before 2018, according to Treasury Secretary Mnuchin. In the meantime,
uncertainty about governments and policies at home and abroad may have
investors opting for investments they perceive to be lower risk, such as U.S.
Treasuries, and that could keep bond yields lower than some had expected.
Data as of 2/24/17
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500
(Domestic Stocks)
|
0.7%
|
5.7%
|
22.7%
|
8.6%
|
11.6%
|
5.0%
|
|
Dow Jones Global ex-U.S.
|
-0.2
|
5.4
|
18.5
|
-1.9
|
1.5
|
-1.3
|
|
10-year Treasury Note (Yield
Only)
|
2.3
|
NA
|
1.7
|
2.8
|
2.0
|
4.6
|
|
Gold (per ounce)
|
1.3
|
8.2
|
0.2
|
-2.1
|
-6.7
|
6.2
|
|
Bloomberg Commodity Index
|
-0.7
|
0.0
|
15.4
|
-13.2
|
-10.2
|
-6.6
|
|
DJ Equity All REIT Total
Return Index
|
2.1
|
4.2
|
19.5
|
11.7
|
11.5
|
4.6
|
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.
the best inventions of 2016. Late last
year, Time Magazine selected 25 inventions that “are making the world better,
smarter, and – in some cases – a little more fun.” Past editions have included
underground parks, gluten sniffers, and the desktop DNA lab. For 2016, the list
included:
·
Spherical
tires. Intended for self-driving cars, spherical tires move in every
direction, allowing cars to maneuver in new and unexpected ways. For example, a
car can slide sideways into a parallel parking space. A critical difference
between current tires and spherical tires is magnetic levitation. That’s right.
The tires hover beneath the car instead of being bolted on.
·
Levitating
lightbulbs. This wireless floating lightbulb “relies on electromagnetism to
levitate and spin, and on resonant inductive coupling – a technical term for
wireless power transmission – to shine.” The bulbs were so popular, the company
created levitating clocks (with custom orbits that can be set for one minute or
one year) and planters.
·
Smarter
toothbrushes. The war on gum disease is never over. Dental hygiene slackers
may find using these electric toothbrushes, which vibrate every 30 seconds to
remind users to switch brush position, more rewarding. Next up: a more
satisfying flossing experience.
·
Assistive
tableware. If you have a loved one with a cognitive disability, assistive
tableware may provide a mealtime solution, helping users eat more and maintain
their dignity. The trick is in the design – bright colors, wide rubber bases,
and easy-to-hold cups and flatware.
·
Playful
prosthetics. A new prosthetic arm for children encourages play and is
likely to make siblings and friends jealous. “When they need a hand, they have
one. But they can replace it with any number of toy-like attachments, all of
which are compatible with” a famous brand of building blocks.
It’s always impressive to
discover what a well-leavened blend of technology and cleverness will produce.
Weekly
Focus – Think About It
“Their conclusion: more gender
diverse companies offer similar return with lower volatility. In other words:
More gender diversity, particularly in corporate settings, can translate to
increased productivity, greater innovation, better decision-making, and higher
employee retention and satisfaction.”
--Morgan Stanley, An
Investor’s Guide to Gender Diversity
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:
https://www.ft.com/content/adde67ba-fa37-11e6-bd4e-68d53499ed71 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-27-17_FinancialTimes-Late_Rally_Sends_Dow_to_11th_Straight_Record_Close-Footnote_3.pdf)
http://www.barrons.com/articles/an-active-voice-for-bonds-1488000330?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-27-17_Barrons-An_Active_Voice_for_Bonds-Footnote_4.pdf)
http://www.barrons.com/articles/the-case-for-u-s-treasury-bonds-1488000294?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-27-17_Barrons-The_Case_for_US_Treasury_Bonds-Footnote_5.pdf)
