PEEK OF THE WEEK
March 6, 2017
Leif Hagen & Donna Roberts
The Markets
It was a grand slam.
Major
U.S. stock markets were positively euphoric following President Trump’s speech
on February 28. Optimism about the new administration’s pro-growth policies
propelled the four major U.S. stock indices to record highs, despite a dearth
of policy details, reported Financial
Times.
It’s
hard to pinpoint exactly why stocks have moved so far, so quickly. However, it
appears that mom-and-pop investors have become quite enthusiastic about the
asset class according to data from JPMorgan
Chase cited by Bloomberg. While
institutional investors (pensions, insurance companies, etc.) have been
reducing exposure to stocks, smaller investors have been loading up on shares.
CNBC reported some industry professionals, including Goldman’s
chief U.S. equity strategist David Kostin, believe stocks have become too
highly valued. ZeroHedge.com quoted
Kostin, who said:
“Cognitive
dissonance exists in the U.S. stock market. S&P 500 is up 10 percent since
the election despite negative EPS [earnings per share] revisions from sell-side
analysts…Investors, S&P 500 management teams, and sell-side analysts do not
agree on the most likely path forward. On the one hand, investors, corporate
managers, and macroeconomic survey data suggest an increase in optimism about
future economic growth. In contrast, sell-side analysts have cut consensus
2017E [estimated] adjusted EPS forecasts by 1 percent since the election and
‘hard’ macroeconomic data show only modest improvement.”
Financial Times reported pessimism prevails in the bond market. One bond
market professional said, “The bond market is taking a totally different view
from the equity market. Blowing raspberries is a good way to put it…There’s no
belief that the growth agenda will be dramatic.”
So, is
strong economic growth ahead? Do bond investors or stocks investors have it
right? Are institutional investors or mom-and-pop investors positioning
themselves correctly? Only time will tell.
Data as of 3/3/17
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard
& Poor's 500 (Domestic Stocks)
|
0.7%
|
6.4%
|
19.6%
|
8.9%
|
11.8%
|
5.7%
|
|
Dow
Jones Global ex-U.S.
|
-0.2
|
5.2
|
12.2
|
-1.4
|
1.7
|
-0.5
|
|
10-year
Treasury Note (Yield Only)
|
2.5
|
NA
|
1.8
|
2.6
|
2.0
|
4.5
|
|
Gold
(per ounce)
|
-2.2
|
5.8
|
-1.9
|
-3.1
|
-6.4
|
6.8
|
|
Bloomberg
Commodity Index
|
-0.3
|
-0.4
|
13.4
|
-13.6
|
-9.8
|
-6.2
|
|
DJ
Equity All REIT Total Return Index
|
-1.0
|
3.2
|
12.4
|
11.0
|
11.2
|
5.5
|
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.
don’t think so! Tax
season is upon us. That means we can all use some entertainment. While many
folks dread the process of completing and filing taxes, some see it as an
opportunity to test the boundaries of the system. Here are a few deductions
Americans have taken that have failed to pass muster in tax court, courtesy of Kiplinger.com:
·
You cannot deduct the cost of a good night’s sleep. A tax preparer who worked from home escaped to a hotel
because her clients were calling in the wee hours of the night and causing her
to lose sleep. When she attempted to take a business deduction for the hotel
expense, the tax court ruled a good night’s sleep is a non-deductible personal
expense.
·
You cannot take a theft loss deduction for poor
construction. A couple moved into their
newly built dream home only to realize the builder had cut some corners. The
house had some serious issues, including its foundation. The couple claimed the
builder had defrauded them and took a large theft loss deduction. While
taxpayers can deduct losses from a home-related theft, shoddy construction
doesn’t qualify.
·
You cannot take a depletion deduction for bodily fluids. A woman earned $7,000 a year donating blood plasma because
of her rare blood type. She took a depletion deduction, claiming “the loss of
both her blood’s mineral content and her blood’s ability to regenerate,” wrote Kiplinger. While companies that take
coal, iron, and other minerals from the ground can take a depletion deduction,
the tax court ruled that individuals cannot claim depletion on their bodies.
·
You cannot deduct a business trip if there are no formal
business meetings involved. A repo firm
sponsored a trip to Las Vegas for its bank customers. The firm’s employees
chatted with clients about business on the way to Vegas, but no formal meetings
were held. The tax court denied the deduction.
Before you get creative with your taxes, consult with a tax
professional.
Weekly
Focus – Think About It
“Because of your
smile, you make life more beautiful.”
--Thich Nhat Hanh, Vietnamese Buddhist monk and peace
activist
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.
* To unsubscribe from the
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Sources:
https://www.ft.com/content/8bb044d0-ff76-11e6-8d8e-a5e3738f9ae4 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-06-17_FinancialTimes-Bond_Investors_Send_Warning_for_Record_High_Equity_Market-Footnote_1.pdf)
https://www.ft.com/content/cc48869a-ff9b-11e6-96f8-3700c5664d30 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-06-17_FinancialTimes-Hearty_Appetite_for_US_Equity_Funds_Since_November_Election-Footnote_2.pdf)
