PEEK OF WEEK
July 9, 2018
Leif Hagen & Donna Roberts
The Markets
What a
rollercoaster of a quarter!
When it comes to the American Association of Individual Investors
(AAII) Sentiment Survey, respondents tend to be more bullish than bearish
about U.S. stock markets. The survey’s historical averages are:
·
38.5 percent bullish
·
31.0 percent neutral
·
30.5 percent bearish
As the second quarter of 2018
began, investors were feeling less optimistic than usual. (About 36.6 percent
were bearish and 31.9 percent bullish.) Their outlook was informed by a variety
of factors, according to an early April article in The New York Times, which said:
“First there was the risk that the
economy might be growing too fast, which could prompt central banks to hike
interest rates sooner than expected. Then there was the risk of a trade war
ignited by the White House imposing tariffs on certain products, an action that
quickly prompted countries like China to erect trade barriers of their own.
Next came the threat of a government crackdown on technology companies, after
revelations of their misuse of customer data.”
As the quarter progressed,
investor optimism increased on signs of economic strength. In early June, CNBC reported the economy appeared to be
“operating close to full employment, with an unemployment rate at 3.8 percent,
inflation still hovering at or below 2 percent, and business and consumer
confidence strong.”
Robust corporate earnings helped
spur optimism, too. FactSet Insight
wrote, “The S&P 500 reported earnings growth of 25 percent for the first
quarter – the highest growth since Q3 2010.” In mid-June, the AAII survey showed 44.8 percent of
respondents were feeling bullish, 21.7 percent were bearish, and 33.5 percent
were neutral.
As talk of tariffs and trade
wars resumed, investor optimism plummeted. By the end of June, just 27.9
percent of respondents were bullish and more than 39 percent reported they were
feeling bearish. AAII explained:
“Many – but not all – individual
investors anticipate continued volatility and/or think that the current
political backdrop could have a further impact on the stock market. Trade
policy is influencing some individual investors’ sentiment as well. While many
approve of the Federal Reserve’s plan to continue gradually raising interest
rates, some AAII members are concerned about the impact that rising rates will
have. Also influencing sentiment are valuations, tax cuts, earnings growth, and
economic growth.”
Despite a
downturn in bullishness, major U.S. stock indices moved higher last week.
Data as of 7/6/18
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500
(Domestic Stocks)
|
1.5%
|
3.2%
|
14.5%
|
10.1%
|
11.0%
|
8.2%
|
|
Dow Jones Global ex-U.S.
|
0.0
|
-4.9
|
5.6
|
3.5
|
4.0
|
0.8
|
|
10-year Treasury Note (Yield
Only)
|
2.8
|
NA
|
2.4
|
2.3
|
2.6
|
3.9
|
|
Gold (per ounce)
|
0.4
|
-3.2
|
2.5
|
2.5
|
0.3
|
3.2
|
|
Bloomberg Commodity Index
|
-1.4
|
-2.2
|
4.6
|
-4.5
|
-7.5
|
-9.4
|
|
DJ Equity All REIT Total
Return Index
|
1.9
|
3.2
|
9.0
|
9.2
|
9.3
|
8.9
|
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.
there’s a carbon dioxide (CO2) shortage.
really, it’s true. Many people agree the
world has too much CO2. It’s the reason representatives from
countries around the world signed the Paris Climate Agreement. They committed
to “adopt green energy sources, cut down on
climate change emissions, and limit the rise of global temperatures,” reported National Public Radio.
The
effort has been less successful than many had hoped, according to the International Energy Association (IEA).
After several years without increases, energy-related emission rose by 1.4
percent in 2017. That’s the rough equivalent of putting 170 million more cars
on the road, reported Scientific American.
Emissions
rose primarily in Asia, although the European Union (EU) saw increases, too.
The biggest decline was in the United States. There’s a certain irony there,
since President Trump announced he would withdraw from the agreement in June
2017, reported The Washington Post.
Despite
realizing a 1.5 percent increase in emissions, the EU is experiencing a
shortage of food-grade CO2. The
Economist reported:
“Food-grade
CO2 is a vital ingredient: it puts the fizz in carbonated
drinks and beer, knocks out animals before slaughter and, as one of the gases
inside packaging, delays meat and salad from going off. A shortage of the stuff
has therefore created havoc in food makers’ supply chains.”
The
EU’s food-grade CO2 is a harvested by-product of processes for
making ammonia and other chemicals, reported The Economist. Three of Britain’s five ammonia plants have been
closed because farmers are using less fertilizer, and CO2 does not
deliver enough revenue to keep the plants running.
Let’s hope the shortage of CO2 doesn’t affect
the supply of beverages available to World Cup fans.
Weekly
Focus – Think About It
“My
garden is an honest place. Every tree and every vine are incapable of
concealment, and tell after two or three months exactly what sort of treatment
they have had. The sower may mistake and sow his
peas crookedly; the peas make no mistake, but come up and show his line.”
--Ralph
Waldo Emerson
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.aaii.com/sentimentsurvey (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-09-18_AAII_Sentiment_Survey-Results_for_Week_Ending_7-4-2018-Footnote_1.pdf)
http://www.aaii.com/sentimentsurvey/sent_results
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-09-18_AAII_Sentiment_Survey-Past_Results-Footnote_2.pdf)
https://www.economist.com/business/2018/07/05/shortages-of-carbon-dioxide-in-europe-may-get-worse
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-09-18_TheEconomist-Shortages_of_Carbon_Dioxide_in_Europe_May_Get_Worse-Footnote_10.pdf)
https://books.google.com/books?id=YvyUAwAAQBAJ&printsec=frontcover&dq=The+heart+of+emerson%27s+journals&hl=en&sa=X&ved=0ahUKEwinmq3P2IrcAhXJx4MKHcu1DcoQ6AEIKTAA#v=onepage&q=The%20heart%20of%20emerson's%20journals&f=false (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-09-18_Book_Excerpt-The_Heart_of_Emersons_Journals-Footnote_11.pdf)
