PEEK OF THE WEEK
June 25, 2018
Leif Hagen & Donna Roberts
The Markets
What time is
it?
The yield curve may be the
pocket watch of economic indicators. It’s been around for a long time and it’s
often right, but not always.
The yield curve is the
difference between the interest paid on two-year government bonds and 10-year
government bonds. In normal circumstances, an investor would expect to earn a
higher rate of interest when lending money to a government for 10 years than
when lending money for two years because there is more risk associated with
lending for a longer period of time.
When the yield curve flattens or
inverts, it suggests a shift in investors’ expectations. Financial Times explained:
“The slope made up of bond yields
of various maturities has a record of predicting recessions that would make
even the savviest econometrician turn pea-green with envy. It is not perfect,
but the curve has become flat and inverted – when short-term bond yields are
actually higher than long-term ones – ahead of most economic downturns in most
major countries since the second world war.”
In the United States last week,
the difference between yields on 2-year Treasuries (2.56) and 10-year
Treasuries (2.90) flattened. The gap narrowed to 34 basis points (a basis point
is one-hundredth of one percent). The change reflects higher short-term rates,
courtesy of the Federal Reserve. It also suggests tariffs and trade issues have
made bond investors more pessimistic about prospects for U.S. growth, reported The Wall Street Journal.
Globally, the yield curve is
inverted. “The average yield of bonds in JPMorgan’s
broadest Government Bond Index that mature in seven to 10 years last week
slipped below the average yields of bonds maturing in one to three years for
the first time since 2007…that indicates that investors have a pretty grim view
of where the world economy and equity markets are heading,” reported Financial Times.
We’re
keeping an eye on developments in the financial markets and will keep you
informed.
Data as of 6/22/18
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500
(Domestic Stocks)
|
-0.9%
|
3.0%
|
13.2%
|
9.1%
|
11.9%
|
7.7%
|
|
Dow Jones Global ex-U.S.
|
-1.2
|
-3.8
|
6.5
|
2.2
|
4.9
|
0.5
|
|
10-year Treasury Note (Yield
Only)
|
2.9
|
NA
|
2.1
|
2.4
|
2.6
|
4.2
|
|
Gold (per ounce)
|
-1.3
|
-2.1
|
1.5
|
2.3
|
-0.3
|
3.7
|
|
Bloomberg Commodity Index
|
-0.4
|
-1.0
|
10.0
|
-4.4
|
-7.1
|
-9.2
|
|
DJ Equity All REIT Total
Return Index
|
2.4
|
0.3
|
3.4
|
7.8
|
9.7
|
7.9
|
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.
You knew carrots were good for your eyes, and a newly discovered use for the orange veggie may help farmers
and/or food processing companies find a new source of revenue. That’s because
carrots can make concrete stronger – and so do sugar beets.
Engineers
at Lancaster University in the United Kingdom are infusing nano platelets from
discarded carrots and root vegetable peels into concrete. This strengthens the
material in an environmentally friendly way. Durability + Design reported:
“These
vegetable-composite concretes were also found to out-perform all commercially
available cement additives, such as graphene and carbon nanotubes and at a much
lower cost…The root vegetable nano platelets work both to increase the amount
of calcium silicate hydrate – the main substance that controls the performance
of concrete – and stop any cracks that appear in the concrete.”
The Economist reported adding 500 grams of platelets reduced the amount
of cement required to make a cubic foot of concrete by 10 percent. In addition
to reducing the amount of building material needed for a project, carrot
concrete also reduces CO2 emissions.
Another
natural material is getting a makeover, too. Researchers at the University of
Maryland are refining processes that make wood stronger than steel, reported Scientific American. It may compete with
titanium alloys and have applications beyond building:
“A five-layer, plywood-like sandwich of densified
wood stopped simulated bullets fired into the material – a result Hu and his
colleagues suggest could lead to low-cost armor. The material does not protect
quite as well as a Kevlar sheet of the same thickness, but it only costs about
5 percent as much, he notes.”
If demand for carrots (and sugar beets and wood) increases
and supply remains constant then we may see prices for those goods increase.
Weekly
Focus – Think About It
“A person with a new idea is a crank until the idea
succeeds.”
--Mark
Twain, American author and humorist
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.
P.S.S. Also,
please remind your friends and family members becoming Medicare eligible that
we offer Medicare insurance and Part D options with
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their agent
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www.HagenFN.com
* 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:
