PEEK OF THE WEEK
July 17, 2017
Leif Hagen & Donna Roberts
The Markets
It was a
good week for a lot of stocks but not bank stocks.
The Standard & Poor’s 500
(S&P 500) Index and the Dow Jones Industrial Average (DJIA) both finished
at record highs last week. Barron’s
indicated investors owe Federal Reserve Chair Janet Yellen a debt of gratitude:
“The main force behind the rally
was the dovish performance by Federal Reserve Chair Janet Yellen in Congress on
Wednesday and Thursday when she reiterated that rate hikes would most likely be
gradual. On balance, her remarks were interpreted as evidence of continued
accommodative monetary policy and, from there, stocks were off to the races.
The ignition of the rally can almost be time-stamped to her appearance. Before
her speech, the market was down for the week.”
Of course, some sectors of the
stock market did better than others last week. In the S&P 500, Real Estate,
Information Technology, and Consumer Staples stocks had the highest percentage
gains at the close on Friday, while Financials, Telecommunications, and
Consumer Discretionary stocks lagged, according to Fidelity.
In the Financials sector, banks
were the weakest performers, finishing Friday almost a full percent lower. It
was a bit of a mystery, wrote Financial
Times (FT), since several banks beat earnings expectations. FT reported:
“Perhaps the most important factor
that weighed on bank stock prices, however, had nothing to do with the comments
from executives nor the quarterly financial results. Macroeconomic data
published on Friday showed U.S. inflation at the consumer level cooled last
month while retail sales fell short of estimates, pushing Treasury bond yields
lower. Lower interest rates are bad news for banks, which make more money if
they can charge borrowers more.”
Investors appear to believe
there is smooth sailing ahead. The CBOE
Volatility Index remained below 10.
Data as of 7/14/17
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500
(Domestic Stocks)
|
1.4%
|
9.9%
|
13.7%
|
7.6%
|
12.7%
|
4.7%
|
|
Dow Jones Global ex-U.S.
|
2.8
|
15.1
|
16.3
|
-0.4
|
5.9
|
-1.3
|
|
10-year Treasury Note (Yield
Only)
|
2.3
|
NA
|
1.5
|
2.6
|
1.5
|
5.0
|
|
Gold (per ounce)
|
1.2
|
6.1
|
-7.8
|
-2.0
|
-5.0
|
6.3
|
|
Bloomberg Commodity Index
|
1.1
|
-5.5
|
-5.1
|
-14.0
|
-10.2
|
-7.0
|
|
DJ Equity All REIT Total
Return Index
|
1.4
|
5.1
|
-1.3
|
8.6
|
9.5
|
6.0
|
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.
merriam webster defines ‘disrupt’ as ‘To break
apart,’ and ‘to throw into disorder.’ While disruption doesn’t sound
like something anyone would enjoy much, it has the potential to create
investment opportunities for those who share a vision and are willing to take
risks.
Morgan Stanley recently wrote, “It’s hard to think of an industry that
won’t be touched in some way by technological disruption over the next decade.”
Here are a few of the trends that may really stir things up during the next few
decades:
·
Machine
learning. “The transportation and medical industries are likely to be first
in line for disruption,” Morgan Stanley suggested.
A disruptive change researcher wrote, “If we think about what machine learning
really is, it’s pattern recognition. We might see radiology and scans detecting
cancers earlier than they’re detected today. And it’s possible that in the
future we can also use machine learning to scan for genes that might predispose
us to certain kinds of diseases.”
·
Autonomous
vehicles. The auto industry, as we know it, is likely to change in some
significant ways when self-driving vehicles become more prevalent. Other
industries will be affected, too. For instance, insurance could change
dramatically. After all, who do you insure when software is driving?
In addition, cities may lose a source of revenue if there is less need
for parking. CNBC wrote, “Reports
estimate self-driving vehicles have the potential to reduce parking space by
about 61 billion square feet, which is about the size of Connecticut and
Vermont combined.” This may be a boon for the real estate market.
The responsibilities of law enforcement may change, too, and crash test
dummies may be out of work.
·
Augmented
reality. Imagine a surgeon being able to practice a surgery, a rigger
learning their craft without scaling heights to lift heavy objects, or a teacher
making students’ textbooks come alive. Augmented reality has the potential to
help professionals refine their skills, make dangerous training safer, and
fascinate students at all levels of learning.
Morgan Stanley also pointed out that Blockchain, which enables
electronic contracts and custody, may change the financial industry, and
Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR) may help
cure disease at the genetic level.
We live in
interesting times!
Weekly
Focus – Think About It
“Companies don’t have ideas. Only people
do. And what motivates people are the bonds of loyalty and trust they develop
around each other.”
--Margaret
Heffernan, International businesswoman and 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:
http://www.barrons.com/articles/dovish-yellen-spurs-markets-to-soar-1500094950?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-17-17_Barrons-Dovish_Yellen_Spurs_Markets_to_Soar-Footnote_2.pdf)
https://eresearch.fidelity.com/eresearch/markets_sectors/sectors/sectors_in_market.jhtml (Click + sign next to Financials to expand)
https://www.ft.com/content/4ad6fe30-689a-11e7-9a66-93fb352ba1fe (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-17-17_FinancialTimes-If_Earnings_Were_So_Good_Why_Did_Bank_Shares_Fall-Footnote_4.pdf)
