PEEK OF THE WEEK
October 1, 2018
Leif Hagen & Donna Roberts
The Markets
It wasn’t headline news…
But, if newsprint was still
popular, last week’s key economic news would have appeared below the fold.
The Federal Reserve raised rates
for the third time in 2018, as expected. In addition, the Federal Open Market
Committee projects economic growth will continue for three more years, although
its median numbers show growth slowing from 3.1 percent in 2018 to 1.8 percent
in 2021. (Remember, forecasts, no matter how venerable the source, are best
guesses and not bedrock.)
Investors weren’t enthusiastic
about the Fed’s actions or its expectations, and the onset of United
States-China tariffs didn’t lift their spirits. Ben Levisohn of Barron’s explained:
“The Dow Jones Industrial Average
dropped 285.19 points, or 1.1 percent, to 26,458.31 on the week, while the
S&P 500 fell 0.5 percent to 2913.98. Neither could be considered life
threatening, and the S&P 500 still rose for a sixth consecutive month. So,
while we need something to blame, we needn’t get too worried. Last Monday
kicked off with the implementation of tariffs by the United States and China
and continued with a Federal Reserve rate hike. Neither was a surprise, though
the Fed might have caught a few napping when it removed the word
‘accommodative’ from its statement.”
What does it mean when the
Federal Reserve removes the word ‘accommodative?’
The Fed pursues ‘accommodative’
or ‘easy’ monetary policy when it is encouraging economic growth. Accommodative
policy may include lowering interest rates or, in unusual circumstances,
quantitative easing.
By removing the word, the Fed
may be signaling that policy will be ‘tightening’ in an effort to prevent the
economy from overheating, reported Sam Fleming of Financial Times. There is debate about whether rates are at a
neutral level; one that won’t cause the economy to run too hot or too cold.
Let’s hope for a Goldilocks
economy.
Data as of 9/28/18
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500
(Domestic Stocks)
|
-0.5%
|
9.0%
|
16.1%
|
15.7%
|
11.6%
|
10.2%
|
|
Dow Jones Global ex-U.S.
|
-0.9
|
-5.2
|
0.1
|
8.0
|
2.1
|
2.9
|
|
10-year Treasury Note (Yield
Only)
|
3.1
|
NA
|
2.3
|
2.1
|
2.6
|
3.6
|
|
Gold (per ounce)
|
-1.0
|
-8.4
|
-7.5
|
1.6
|
-2.2
|
2.8
|
|
Bloomberg Commodity Index
|
1.0
|
-3.4
|
0.7
|
-0.8
|
-7.7
|
-6.5
|
|
DJ Equity All REIT Total
Return Index
|
-1.1
|
2.1
|
4.7
|
9.8
|
9.7
|
8.4
|
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.
when do you behave the most like yourself? Don’t
worry. This isn’t about soul-searching and trying to find answers to
existential questions like, ‘Who am I?’ or ‘What is my purpose?’ or ‘How should
I live my life?’
Nope. This is about a science
experiment!
Ian Krajbich of Ohio State
University and Fadong Chen of Zhejiang University in China wanted to better
understand how people made social decisions, according to a paper they
published in Nature Communications.
They began with the premise that “Social decisions typically involve conflicts
between selfishness and pro-sociality.”
Then, they asked 200 students in
the United States and Germany to play “mini-dictator games in which subjects
make binary decisions about how to allocate money between themselves and
another participant.”
Science Daily explained, “In some cases, participants had to decide
within two seconds how they would share their money as opposed to other cases,
when they were forced to wait at least 10 seconds before deciding. And, in
additional scenarios, they were free to choose at their own pace, which was
usually more than two seconds but less than 10.”
The upshot was people who were
pro-social became more pro-social, and people with more selfish instincts
became more selfish, under severe time constraints. Given more time,
“pro-social subjects became marginally less pro-social under time delay…while
selfish subjects became less selfish under time delay…though these effects are
less pronounced.”
Maybe you behave most like you
when you’re pressed for time.
Weekly Focus – Think About
It
“Selfishness is not living as
one wishes to live, it is asking others to live as one wishes to live.”
--Oscar Wilde, Irish poet and playwright
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://accounts.ft.com/login?location=https%3A%2F%2Fwww.ft.com%2Fcontent%2F635daa64-c1ac-11e8-95b1-d36dfef1b89a (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-01-18_FinancialTimes-Federal_Reserve_Raises_US_Interest_Rates_Despite_Trade_War_Concerns-Footnote_1.pdf)
https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20180926.htm (Table: Change in real GDP)
https://www.barrons.com/articles/dow-drops-1-1-on-week-as-tariffs-fed-take-their-toll-1538182108
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-01-18_Barrons-Dow_Drops_1.1_Percent_on_Week_as_Tariffs_Fed_Take_Their_Toll-Footnote_3.pdf)
