PEEK OF THE WEEK
June 18, 2018
Leif Hagen & Donna Roberts
The Markets
Deal or no
deal?
Last week opened with heightened
trade tensions between the United States and its allies. It closed with the
United States imposing new tariffs on $50 billion of Chinese goods. The Chinese
declared it was the start of a trade war, reported Financial Times.
U.S. markets largely ignored the
potential impact of trade wars on multiple fronts. Barron’s reported the Dow Jones Industrial Average, which includes
companies that are vulnerable to tariffs, moved slightly lower. However, the
Standard & Poor’s 500 Index shrugged off the possibility of trade wars, and
the NASDAQ Composite gained more than 1 percent.
While Barron’s has written the largest risk to the U.S. stock market is
the possibility of global trade wars, it appears many investors believe tariffs
are a negotiating tactic. Barron’s
reported:
“The market’s apparent indifference
suggests it doesn’t see these tariffs as the reincarnation of Smoot-Hawley, but
just the latest in President Trump’s negotiating tactics. Moving away from his
denunciation of Kim Jong-un as “Little Rocket Man” inviting “fire and fury” by
missile launches, Trump last week declared the threat from North Korea
neutralized. Similarly, many professional investors view the bluster on tariffs
as part of Trump’s negotiating tactics, rather than the start of an actual
trade war.”
News that monetary policy is
becoming less accommodating in certain regions of the world didn’t have much
impact on markets either. Reuters
reported the Federal Reserve raised its benchmark rate 0.25 percent last week.
The European Central Bank is ending its bond-buying program and gave notice it
expects to begin raising rates next summer. The Bank of Japan is still easing.
There was a lot of red ink in
Asian emerging markets. China’s Shanghai Composite finished the week lower, as
well. However, stock markets in Canada and Mexico finished the week higher.
Data as of 6/15/18
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard
& Poor's 500 (Domestic Stocks)
|
0.0%
|
4.0%
|
14.3%
|
10.1%
|
11.1%
|
7.4%
|
|
Dow
Jones Global ex-U.S.
|
-1.0
|
-2.6
|
8.3
|
3.4
|
3.8
|
0.4
|
|
10-year
Treasury Note (Yield Only)
|
2.9
|
NA
|
2.2
|
2.4
|
2.2
|
4.2
|
|
Gold
(per ounce)
|
-1.0
|
-0.9
|
2.5
|
2.9
|
-1.5
|
3.8
|
|
Bloomberg
Commodity Index
|
-2.5
|
-0.5
|
8.4
|
-4.4
|
-7.7
|
-9.1
|
|
DJ
Equity All REIT Total Return Index
|
-0.7
|
-2.0
|
0.3
|
7.5
|
7.9
|
6.9
|
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.
sorry America, you’re not in the tournament. If
you’ve been watching the World Cup – the global
soccer championship – you’ve probably seen the commercials entreating Americans
to root for another country since we don’t have a team playing. The ads offer
encouragements like, “Iceland could really use your support. We don’t have
enough people to do the wave,” and “Cheer for Germany. We gave you the
frankfurter!”
If you haven’t already chosen a
favorite team, you may want to consider (or not) the insight of economists
before making your choice. Since the demise of Paul, the octopus that
successfully predicted winners during the 2010 final, various firms’ economists
have offered opinions about this year’s possible winner. Financial Times reported:
·
Multinational analysts at a Japanese bank
concluded “…using portfolio theory and the efficient-markets hypothesis as well
as data on the value, form, and historical performance of players, that France
will beat Spain in the final, with Brazil in third place.”
·
A German bank predicted Germany will win, and so
did a Swiss bank that relied on unspecified econometric tools to determine that
Germans have a 24 percent chance of victory.
·
A Dutch bank concluded Spain will be the big
winner.
Perhaps the most interesting
analysis was done by the Toulouse School of Economics, which employed automated
face-reading software on World Cup sticker albums from the 1970s through the
present. They found teams that did better in the group stage had players who
looked happier or angrier on the stickers. Happiness showed confidence and
anger led to fewer goals allowed.
Weekly
Focus – Think About It
“Winning is great, sure, but if
you are really going to do something in life, the secret is learning how to
lose. Nobody goes undefeated all the time. If you can pick up after a crushing
defeat, and go on to win again, you are going to be a champion someday.”
--Wilma Rudolph, American sprinter and Olympic champion
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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Sources:
https://www.ft.com/content/e04a2368-70a3-11e8-92d3-6c13e5c92914 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-18-18_FinancialTimes-No_Great_Terror_in_Markets_Despite_Trade_War_Fears-Footnote_1.pdf)
https://www.barrons.com/articles/tariffs-nukes-rates-more-sound-than-fury-1529108154 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-18-18_Barrons-Tariffs_Nukes_Rates-More_Sound_than_Fury-Footnote_2.pdf)
https://www.barrons.com/articles/how-investors-can-protect-themselves-in-a-trade-war-1528912117
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-18-18_Barrons-How_Investors_Can_Protect_Themselves_in_a_Trade_War-Footnote_3.pdf)
http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_other
(Click on U.S. & Intl Recaps, “Central banks, tariffs – a busy
week,” then scroll down to the market recap chart) (or
go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-18-18_Barrons-Global_Stock_Market_Recap-Footnote_5.pdf)
https://www.ft.com/content/9ce1425c-6caf-11e8-852d-d8b934ff5ffa
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-18-18_FinancialTimes-World_Cup-Applying_Economic_Theory_to_Predict_the_Winner-Footnote_7.pdf)
