PEEK OF THE WEEK
May 30, 2017
Leif Hagen & Donna Roberts
The Markets
Is preparing
for the future more important than enjoying the present?
There is a
lot to enjoy today. Last week, Financial
Times wrote:
“Wall Street ended an impressive
week on a steady note – eking out a tiny gain to a fresh record close – as oil
prices recouped some of the previous day’s steep losses and the latest U.S.
Gross Domestic Product data reinforced expectations for a June rate rise.”
In fact, U.S. equities have been
performing well for some time. The Standard & Poor’s (S&P) 500 Index achieved
new highs 18 times during 2016 and, so far in 2017, we’ve scored 20 closing
highs, including three last week.
While it’s important to enjoy
current gains in U.S. stock markets, it’s equally important to prepare for the
future. Bull markets don’t continue forever. They often experience corrections.
A correction during a bull market is a 10 percent decline in the value of a
stock, bond, or another investment. Often, corrections are temporary
adjustments followed by additional market gains, but they can be a signal a
bear market or recession is ahead.
One investment professional
cited by CNBC believes a correction may
occur soon. “Gundlach expects the 10-year Treasury yield to move higher, and a
summer interest rate rise should ‘go along with a correction in the stock
market.’”
Barron’s cautioned strong employment
numbers also may signal a downturn is ahead:
“Think about it: Jobs are a classic
lagging indicator, and bouts of high unemployment and economic distress are
often accompanied by falling stocks. By the time the economy improves enough to
enjoy full employment, share prices will reflect that rosier outlook. That’s
not to say stocks can’t do well following periods of full employment…Unemployment
was 2.5 percent in 1953, and yet the market delivered big gains over the next
seven years. But stocks happened to be very cheap in 1953, with a cyclically
adjusted price-to-earnings ratio of just 11.6 times…That valuation is now pushing
29 times.”
There is no way to know when a
correction or market downturn may occur, but if history proves out, one is
likely at some point in the future.
Data as of 5/26/17
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500 (Domestic
Stocks)
|
1.4%
|
7.9%
|
15.6%
|
8.1%
|
12.6%
|
4.8%
|
Dow Jones Global ex-U.S.
|
0.7
|
12.6
|
15.4
|
-0.6
|
5.8
|
-1.0
|
10-year Treasury Note (Yield
Only)
|
2.3
|
NA
|
1.8
|
2.5
|
1.7
|
4.9
|
Gold (per ounce)
|
1.0
|
9.1
|
3.4
|
-0.3
|
-4.3
|
6.7
|
Bloomberg Commodity Index
|
-0.8
|
-4.0
|
1.6
|
-14.6
|
-8.5
|
-6.8
|
DJ Equity All REIT Total
Return Index
|
0.7
|
3.4
|
6.1
|
8.9
|
10.5
|
5.3
|
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.
are americans vacation avoiders? Project: Time Off reports Americans spent
16.8 days on vacation during 2016, on average. That was an improvement from
2015, when the average was 16.2, but it was well below the 20.3 days a year spent
on holiday from 1978 through 2000.
The shortening of American
vacations owes something to both fear and ambition, according to Project: Time Off:
“Americans are still worried about
job security when it comes to taking time off. More than a quarter (26 percent)
say they fear that taking vacation could make them appear less dedicated at
work, just under a quarter (23 percent) say they do not want to be seen as
replaceable, and more than a fifth (21 percent) say they worry they would lose
consideration for a raise or promotion.”
While waiving a few vacation
days may impress the boss, there are some significant economic consequences.
For instance:
·
Forfeiting 206 million vacation days in 2016 cost
employees $66.4 billion in aggregate and about $604 individually.
·
The increase in vacation day usage from 2016 to
2017 contributed $37 billion to the U.S. economy, helped create 278,000 jobs,
and generated $11 billion in additional income across the country.
As it turns out, gender and job
title are good predictors of the likelihood vacation days will remain unused.
Last year, men were more likely than women to use all of their vacation days,
even though women were more likely to say that vacation was extremely
important.
The same was true of senior management.
Company leaders believe corporate culture encourages vacation and often hear
about the value of taking vacation, but are unlikely to use all of their
vacations days.
Weekly
Focus – Think About It
“The only people for me are the
mad ones, the ones who are mad to live, mad to talk, mad to be saved, desirous
of everything at the same time, the ones who never yawn or say a commonplace
thing, but burn, burn, burn like fabulous yellow roman candles exploding like
spiders across the stars.”
--Jack Kerouac, American
author
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:
https://www.ft.com/content/46aca00c-41b8-11e7-9d56-25f963e998b2 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-30-17_FinancialTimes-S%26P_500_Inches_Up_to_Fresh_Record_Close-Footnote_1.pdf)
https://www.ft.com/content/7a71ac6c-ae8b-3df0-8b7b-5de3ee9ff949 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-30-17_FinancialTimes-S%26P_500_Closes_at_Record_High_for_Third_Straight_Day-Footnote_2.pdf)
http://www.barrons.com/articles/theres-something-manic-about-this-market-1495858813?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-30-17_Barrons-Theres_Something_Manic_About_This_Market-Footnote_5.pdf)
