PEEK OF THE WEEK
March 26, 2018
Leif Hagen & Donna Roberts
The Markets
Why am I
saving and investing?
After a week like last week,
it’s an important question. There are many reasons people save and invest,
including to:
·
Live the life they want today and in the future
·
Accumulate resources so they’re prepared for any
bumps in the road
·
Provide an education for their children
·
Offer assistance to parents
·
Support a young person with a disability
·
Do good in the world
·
Live comfortably in retirement without anxiety
However, none
of these reasons have anything to do with short-term market fluctuations.
Last week, major U.S. stock
indices experienced a selloff, and we saw a dramatic downturn in stock markets.
The Dow Jones Industrial Average was down 5.7 percent, the Standard & Poor’s
500 index lost 6 percent, and the NASDAQ fell 6.5 percent, reported Barron’s.
Those are big moves for a single
week. The kind of moves that light up the emotion centers of investors’ brains
and make them want to sell.
It’s not a new phenomenon. In
2002, in an article for CNN Money,
Jason Zweig explained the brain’s potentially negative influence on investment
decisions, “But in the world of investing, a panicky response to a false alarm
– dumping all your stocks just because the Dow is dropping – can be as costly
as ignoring real danger. For one thing, it can cause you to flee the market at
a low point and miss out when the market bounces back. A moment of panic can
also disrupt your long-term investing strategy.”
So, what happened last week? In
short:
·
The Fed
raised rates, as expected. The Federal Reserve raised the Fed funds rate by
a quarter of a percent, which may benefit savers and investors, but will make
borrowing more expensive.
·
Tariffs
triggered trade war worries. The Trump administration levied tariffs on
China, raising concerns of a global trade war.
·
You’re fired! There was additional turnover among
senior advisers to President Trump.
·
Can they
do that? British news reported a data analytics firm has been influencing
elections around the world in some unsavory ways.
·
Don’t
share my data! There was news a social media firm had shared the personal
data of thousands with a researcher who shared it with a third-party firm without
permission.
·
Sigh.
Another data breach. An online travel company experienced a data breach
that may have exposed the personal information of 880,000 users.
·
The
economy is chugging along. Last week’s U.S. economic releases were
overshadowed by everything else, but many indicated a strengthening economy,
reported Barron’s.
That’s a lot to take in over the
span of five days. The critical thing is to recognize these short-term events
are unlikely to change your long-term financial goals. Financial decisions,
including buying and selling investments, are important and can be life
shaping. They should be grounded by long-term financial goals and foundational
principles of investing. They should not be based on the brain’s instinctive
fear and flight response.
Data as of 3/23/18
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500
(Domestic Stocks)
|
-6.0%
|
-3.2%
|
10.3%
|
7.1%
|
10.8%
|
6.7%
|
|
Dow Jones Global ex-U.S.
|
-2.7
|
-2.1
|
13.4
|
3.3
|
3.8
|
0.9
|
|
10-year Treasury Note (Yield
Only)
|
2.8
|
NA
|
2.4
|
1.9
|
1.9
|
3.5
|
|
Gold (per ounce)
|
2.8
|
3.9
|
7.9
|
4.3
|
-3.4
|
3.8
|
|
Bloomberg Commodity Index
|
0.1
|
-0.8
|
3.4
|
-4.4
|
-8.7
|
-7.9
|
|
DJ Equity All REIT Total
Return Index
|
-4.0
|
-10.0
|
-3.7
|
0.9
|
6.3
|
6.1
|
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.
let’s take a good news break. After last
week, we could all use some good news. Here are 10 intriguing headlines from
the Good News Network:
1.
Scientists Believe They Found a Way to Stop Future
Hurricanes in Their Tracks
2.
Strangers Rally Around 13-Year-old Whose Rock
Museum was Robbed
3.
Dog that Shoplifted a Book on ‘Abandonment’ is
Given the Love It was Asking For
4.
Stranger Becomes Honorary Grandma After She
Opens Home to Stranded Father in Distress
5.
We’re Not Spinning a Yarn Here: Knitting May
Boost Health and Happiness
6.
Robot Becomes Part of the Community After Easing
Daily Burden of Water Collection in Remote Village
7.
Instead of Using Trees, Scientists are Making Sustainable
Paper Out of Manure
8.
World’s First Mass-Produced, 3D-Printed Car is Electric
and Costs Under $10K
9.
This Pollution-Gobbling City Bench Can Absorb as
Many Toxins as 275 Trees
10. Free
Clothing Hung on Streets to Help the Homeless Stay Warm
There is a lot of good news in
the world. Unfortunately, it doesn’t pack a wallop like bad news does, so we
hear less about it.
Weekly
Focus – Think About It
“When the weather changes,
nobody believes the laws of physics have changed. Similarly, I don't believe
that when the stock market goes into terrible gyrations its rules have
changed.”
--Benoit Mandelbrot, Mathematician and
polymath
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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Suite 203; Eagan, MN 55122.
Sources:
https://www.barrons.com/articles/why-did-dow-drop-1-400-pick-your-poison-1521852744 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-26-18_Barrons-Why_Did_Dow_Drop_1400-Pick_Your_Poison-Footnote_1.pdf)
https://www.ft.com/content/e4e95b6c-2dac-11e8-9b4b-bc4b9f08f381 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-26-18_FinancialTimes-Chiefs_Hubris_Steered_Cambridge_Analytica_to_Data_Scandal-Footnote_7.pdf)
http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_other (Click on U.S. & Intl Recaps, then "Factory
sector accelerates, housing prices climb") (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-26-18_Barrons-Factory_Sector_Accerlerates-Housing_Prices_Climb-Footnote_10.pdf)
https://www.goodnewsnetwork.org/this-pollution-gobbling-city-bench-absorbs-as-much-co2-as-275-trees/
