PEEK OF THE WEEK
July 23, 2018
Leif Hagen & Donna Roberts
The Markets
Last week, there was some good
news and some notable news.
Here’s the good news: Corporate
earnings have been strong. As of July 20, 17 percent of the companies in the Standard
& Poor’s 500 Index had reported second quarter results. More than 85
percent of those companies reported positive earnings surprises, according to FactSet, which means they earned more
than expected.
“It appears the lower tax rate is
more than offsetting the impact of rising costs, resulting in a record-level
net profit margin for the index for the second quarter,” explained FactSet.
Here’s the notable news: U.S.
stock markets largely ignored a slew of domestic and global issues to finish up
a basis point or two last week. (Performance was flat when you round to one
place, as we do in the table.) Barron’s
reported:
“President Donald Trump took on the
Federal Reserve, telling an interviewer that he’s ‘not happy’ about rising
interest rates, the kind of meddling we haven’t seen in a while. We also had
the usual trade war concerns, as the president and his advisors talked about
the need to take on what they consider China’s unfair trade practices. China’s
yuan, meanwhile, tumbled in a way that was a little too reminiscent of August
2015, when its slide caused global markets to shudder. Those concerns, however,
were offset by strong corporate earnings.”
The U.S. bond market has been less sanguine than the U.S.
stock market. Debate has focused on the flattening yield curve. The yield curve
reflects the difference in yield on U.S. Treasuries from short- to long-term. Normally,
investors expect to earn higher yields when they lend their money for longer
periods of time (e.g. invest in longer-term bonds).
At the end of last week, two-year U.S. Treasuries yielded
2.6 percent and 30-year Treasuries yielded 3.0 percent. Some say when
short-term rates rise above long-term rates, inverting the yield curve,
recession is ahead.
Data as of 7/20/18
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500
(Domestic Stocks)
|
0.0%
|
4.8%
|
13.3%
|
9.6%
|
10.6%
|
8.3%
|
|
Dow Jones Global ex-U.S.
|
0.2
|
-4.2
|
2.8
|
3.0
|
3.0
|
0.9
|
|
10-year Treasury Note (Yield
Only)
|
2.9
|
NA
|
2.3
|
2.4
|
2.5
|
4.1
|
|
Gold (per ounce)
|
-1.0
|
-5.2
|
-0.8
|
3.6
|
-1.5
|
2.5
|
|
Bloomberg Commodity Index
|
-0.2
|
-5.1
|
0.0
|
-4.5
|
-8.4
|
-8.9
|
|
DJ Equity All REIT Total Return
Index
|
-1.6
|
0.6
|
3.4
|
7.4
|
7.7
|
8.0
|
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.
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.
forward
looking career: Air Broker. By 2050, about 70 percent of the world’s
population is expected to live in cities, reports UNICEF.
The United States is ahead of the curve. Since the 1990s, 75
percent or more of Americans have lived in metropolitan areas. The same was
true in Spain, the United Kingdom, Australia, and Canada. In 2000, citizens of Mexico,
Korea, and Brazil were largely urban dwelling. By 2050, China and India are
expected to have almost two billion people living in cities – and neither will
have crossed the 75 percent level.
If the thought of densely packed cities inspires a bit of
claustrophobia, you’re not alone. Anyone who has ever watched ‘Green Acres’
knows city living isn’t for everyone. However, cities are innovation engines,
reports Fast Company. “The more
people there are in an area, and the more densely they’re networked, the more
startups get created and the more patents get filed.”
Consider the entrepreneurial example set by a New York City
(NYC) deli owner who was trying to figure out how to stay in business on the
Lower East Side of Manhattan. The answer was selling air, reports The Indicator From Planet Money:
“So when you buy a plot of land in New
York, it comes with what are called ‘air rights.’ That essentially says how
much you are allowed to build on that plot of land. Let’s say you buy a plot of
land and it comes with 10 stories worth of air rights, you could build a
10-story building on it.”
The deli owned five stories worth of air rights, or
27,960.66 square feet of air. How much was all that air worth? Reportedly, a
developer in New York paid about $17 million for it.
Guess who negotiates air deals in NYC.
That’s right: Air brokers.
Weekly Focus – Think About
It
“Growth is inevitable and
desirable, but destruction of community character is not. The question is not
whether your part of the world is going to change. The question is how.”
--Edward T. McMahon, Author
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:
https://www.barrons.com/articles/stocks-at-a-standstill-as-earnings-offset-tariffs-1532131202 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/7-23-18_Barron's-Stocks_at_a_Standstill_as_Earnings_Offset_Tariffs-Footnote_3.pdf)
https://www.unicef.org/sowc2012/urbanmap/# (Place cursor over the country to find country/population
percentages.)
https://www.npr.org/sections/money/2018/07/20/630949390/the-market-for-air (Audio starts at 2:56)
