PEEK OF THE WEEK
September 18, 2017
Leif Hagen & Donna Roberts
The Markets
“In theory,
there is no difference between theory and practice, in practice there is.”
Yogi Berra was talking about
baseball, but the concept also applies to diversification, according to the GMO White Paper, The S&P 500: Just Say No. From the title, you might think the authors
– Matt Kadnar and James Montier – don’t like U.S. stocks. They do:
“Being a U.S. equity investor over
the past several years has felt glorious. The S&P 500 has trounced the
competition provided by other major developed and emerging equity markets. Over
the last 7 years, the S&P is up 173 percent (15 percent annualized in
nominal terms) versus MSCI EAFE (in USD terms), which is up 71 percent (8
percent annualized), and poor MSCI Emerging, which is up only 30 percent (4
percent annualized). Every dollar invested in the S&P has compounded into
$2.72 versus MSCI EAFE’s $1.70 and MSCI Emerging’s $1.30.”
The authors’ concern is U.S.
markets have performed so well, investors may be tempted to abandon
diversification and concentrate their portfolios in indexed U.S. stocks. Kadnar
and Montier wrote, “Human nature is to extrapolate the recent past. It is easy
to see, given the strong performance of U.S. equities in both absolute and
relative terms, why many are suggesting they are the only asset you need to own.”
Focusing assets in the United
States, according to GMO, ignores the
most important determinant of long-term returns: valuation. “From our
perspective, one has to make some fairly heroic assumptions to believe that the
S&P is even remotely close to fair value.”
High valuations haven’t dulled
the appeal of U.S. stocks for investors, though. Last week, the S&P 500
closed at a record high, and the Dow Jones Industrial Average posted its
biggest gain since last December, reported CNBC.com.
Data as of 9/15/17
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500
(Domestic Stocks)
|
1.6%
|
11.7%
|
16.4%
|
8.0%
|
11.3%
|
5.4%
|
|
Dow Jones Global ex-U.S.
|
0.7
|
18.9
|
18.3
|
1.6
|
4.4
|
-0.2
|
|
10-year Treasury Note (Yield
Only)
|
2.2
|
NA
|
1.7
|
2.6
|
1.8
|
4.5
|
|
Gold (per ounce)
|
-1.7
|
14.1
|
0.9
|
2.3
|
-5.7
|
6.3
|
|
Bloomberg Commodity Index
|
0.5
|
-2.6
|
2.6
|
-11.1
|
-10.5
|
-6.9
|
|
DJ Equity All REIT Total
Return Index
|
0.4
|
8.1
|
7.1
|
10.5
|
9.5
|
6.7
|
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.
7 steps to protect yourself after the equifax breach.
From May through July, hackers exploited a website vulnerability at
Equifax, one of the major consumer credit reporting agencies. If you have a
credit report, there is a chance your sensitive and personal information
including Social Security numbers, birth dates, addresses, and driver’s license
numbers, may have fallen into the wrong hands. The stolen information could be
used in tandem with passwords taken from other databases to commit financial
crimes against you, reported a source cited by Consumer Reports.
Here are seven
steps to take to help protect your assets and credit:
1.
Find out
if you were affected. From a secure computer or encrypted network connection,
go to the Equifax website, www.equifaxsecurity2017.com.
Scroll down and click on ‘Potential Impact.’ You will be asked to provide your
last name and the last six digits of your Social Security number.
2.
Enroll in
TrustedID Premier. If your data has been breached, Equifax will offer enrollment
in TrustedID Premier. The program provides up to $1 million in ID theft
insurance, Social Security Number Scanning, 3-bureau credit file monitoring,
and the option to freeze your Equifax credit report.
3.
Place a
fraud alert or credit freeze on your other credit reports. Experian,
TransUnion, and Innovis also provide credit reporting services. Contact each of
the companies to place an alert or a freeze on your credit report:
·
A fraud
alert warns both current and prospective lenders they must take reasonable
steps to verify your identity before providing credit. When you’re a victim of
ID theft, an alert can be put in place for up to seven years.
·
A credit
freeze is different. It restricts access to your credit report. If you
request a freeze, the credit agency will send a letter with a personal ID
number (PIN). Keep the PIN in a safe place. You’ll need it to unfreeze your
accounts, according to the Federal Trade Commission.
4.
Change
your passwords. Create new passwords for online banking, brokerage, and
financial accounts. Each account should have a unique password. Best practices
suggest passwords have 12 to 14 characters.
You may want to consider using a password management application. They’re
designed to store and retrieve passwords so you can keep track of multiple
long, unique password combinations without security issues like storing
passwords improperly or failing to remember them.
5.
Activate
two-factor authentication. Two-factor authentication provides an additional
layer of security for email and other accounts. After you enter your user ID
and password, you’ll be asked for a code to verify your identity. You can have the
account provider text a code to your phone, although that creates vulnerability
if your phone is stolen. A better option may be to download an authenticator app
so you can generate your own code.
6.
Beware email
links. Some fraud attempts are obvious: text or email from a Nigerian prince
or an update request from a financial institution where you don’t have an
account. Others may be more difficult to spot. As a rule of thumb, if you
receive an email with a link requesting you update or make changes to a
financial account, don’t click on it. Call the financial institution or go directly
to its website to make any changes.
7.
Keep an
eye on your accounts. Check bank, brokerage, and other financial statements
for suspicious transactions. If you find unauthorized activity, report it to
the institution and the proper authorities.
If you have
any questions or concerns about this breach or the markets, please contact us.
Weekly
Focus – Think About It
“The most
effective way to do it, is to do it.”
--Amelia Earhart, American aviation
pioneer
Best Regards,
Leif M. Hagen
Leif M. Hagen, CLU, ChFC
LP Financial Advisor
Securities offered through LPL Financial Inc., Member FINRA/SIPC.
P.S. Please feel free to forward this commentary
to family, friends, or colleagues.
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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.gmo.com/docs/default-source/research-and-commentary/strategies/asset-allocation/the-s-p-500-just-say-no.pdf?sfvrsn=7 (Pages 4 and 8)
