PEEK OF THE WEEK
October 9, 2017
Leif Hagen & Donna Roberts
The Markets
Slow and steady...
It has been 332 days since the
Standard & Poor’s 500 (S&P 500) Index experienced a 5 percent drop,
reported Barron’s. If there isn’t a
selloff on Monday or Tuesday, this will become the
longest rally without such a drop.
During
this period, the Index has gained 33 percent. Think about that for a moment: 33
percent over 332 days. By Barron’s
calculations, the market has gained less than 0.1 percent per day. That’s a
very slow rate of increase, relatively speaking. The longest-ever rally without
a 5 percent drop, which began in November 1994, was accompanied by a gain of 56
percent or 0.17 percent per day.
The
most recent issue of The Economist
pondered the phenomenon of the slow-as-molasses bull market that has pushed
asset prices higher:
“No
one would mistake the bloodless run-up in global stock markets, credit, and
property over the past eight years for a reprise of the ‘roaring 20s,’ or even
an echo of the dotcom mania of the late 1990s. Yet only at the peak of those
two bubbles has America’s S&P 500 been higher as a multiple of earnings
measured over a ten-year cycle. Rarely have creditors demanded so little
insurance against default, even on the riskiest ‘junk’ bonds. And rarely have
property prices around the world towered so high…the world is in the throes of
a bull market in everything.”
It
would be a mistake to assume asset prices will continue to move higher
indefinitely. One characteristic that may signal the onset of a bear market is
investor euphoria, and we haven’t seen that. The most recent American Association of Individual
Investors’ Sentiment Survey showed 2.3 percent more investors were bullish
last week, pushing the total to 35.6 percent. That’s still well below the
historic average of 38.5 percent.
Last week was punctuated by a
senseless shooting. Our hearts and prayers are with the people of Las Vegas.
Data as of 10/6/17
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500
(Domestic Stocks)
|
1.2%
|
13.9%
|
18.0%
|
9.1%
|
11.9%
|
5.1%
|
Dow Jones Global ex-U.S.
|
0.5
|
19.3
|
17.5
|
3.3
|
4.8
|
-1.0
|
10-year Treasury Note (Yield
Only)
|
2.4
|
NA
|
1.7
|
2.4
|
1.8
|
4.6
|
Gold (per ounce)
|
-1.7
|
8.9
|
0.6
|
1.8
|
-6.6
|
5.6
|
Bloomberg Commodity Index
|
-0.6
|
-4.1
|
-1.9
|
-11.1
|
-10.6
|
-6.9
|
DJ Equity All REIT Total
Return Index
|
0.5
|
6.6
|
8.6
|
10.2
|
10.1
|
5.6
|
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.
Zombie tourism and zombie companies. Zombies
have a special place in the heart of pop culture. The undead are pivotal
characters in books, movies, games, and television shows. The practical can
read The Zombie Survival Guide.
Thrill seekers can binge on The Walking
Dead. Romantics have Pride and
Prejudice and Zombies. Anyone looking for a laugh can watch Shaun of the Dead or Zombieland.
If you’re one of those people
who just can’t get enough of roamers, rotters, biters, and crawlers, you’re in
for a treat: zombie tourism. National
Geographic has identified several travel destinations that are steeped in
zombie legend:
1.
Haiti.
American zombie culture appears to have origins in Haiti, where slaves believed
death would reunite them with their gods and homelands. The exception was
suicide. If slaves took their own lives, they “would be forced to remain in
their bodies, soulless, and continue to work the plantations.”
2.
Greece.
In Greece and elsewhere, folklore historians have found anyone who died of
plague or was cursed, murdered, or born on an inauspicious day, could
potentially rise from the dead. Some archeology digs have found graves with
skeletons weighted by rocks or millstones.
3.
Georgia (in Europe). You won’t find any zombies here – and that’s
the point. Apparently, Georgia boasts some of the world’s most promising
zombie-proof dwellings. The village of Chazhashi, at the confluence of the
lnguri and Black Rivers, has more than 200 nearly impenetrable medieval tower
houses.
Zombies aren’t always undead
humans. There are zombie companies, too. A zombie company is debt-laden and on
the edge of bankruptcy. In fact, the Organization
for Economic Co-operation and Development (OECD) thinks zombie firms may be one reason economic growth has
been so slow. The Economist reported:
“We know that a few companies are
still producing substantial productivity gains but it may be that monetary
policy, by keeping rates low, has stymied the forces of creative destruction;
‘zombie’ companies have been kept alive, dragging down the productivity
numbers. Whatever the reason, economic growth won't rebound until productivity
perks up.”
Perhaps National Geographic should add some
quarterly earnings calls to its zombie tourism list.
Weekly
Focus – Think About It
“Fear is the main source of superstition,
and one of the main sources of cruelty. To conquer fear is the beginning of
wisdom.”
--Bertrand Russell, British philosopher
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/stocks-hit-new-highs-as-the-bull-trots-steadily-on-1507344223 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-09-17_Barrons-Stocks_Hit_New_Highs_as_the_Bull_Trots_Steadily_On-Footnote_1.pdf)
https://www.economist.com/news/leaders/21730019-ultra-loose-monetary-policy-coming-end-it-best-tread-carefully-asset-prices-are (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-09-17_TheEconomist-Asset_Prices_are_High_Across_the_Board-Is_it_Time_to_Worry-Footnote_2.pdf)
https://www.economist.com/blogs/buttonwood/2017/01/light-bulb-moment (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-09-17_TheEconomist-The_Curious_Case_of_Missing_Global_Productivity_Growth-Footnote_9.pdf)
