PEEK OF THE WEEK
December 11, 2018
Leif Hagen & Donna Roberts
The Markets
We’re off to a slow start.
December is usually the best month of the year for the stock
market. It has been since 1950, according to Randall Forsyth of Barron’s, but not so far this year.
Two issues made investors particularly uncomfortable last
week which helped trigger a sell-off that pushed major U.S. stock indices
lower.
1.
Fading
optimism about an easing of trade tensions with China. It looked like the relationship
between the United States and China might thaw, and Americans were feeling
pretty optimistic about a trade truce. In fact, markets moved higher Monday in
anticipation.
Unfortunately, on the same day that
Presidents Trump and Xi Jinping shared a cordial dinner, the chief financial
officer of a major Chinese telecommunications firm was arrested at the request
of the United States. The Economist
reported, “[The company] is a pillar of the Chinese economy – and Ms. Meng is
the founder’s daughter. The fate of the trade talks could hinge on her
encounter with the law.”
2.
A section
of the yield curve inverted. Normally, Treasury yields are higher for
longer maturities of bonds than for shorter maturities of bonds. Last week,
yields on three-year and five-year bonds inverted, meaning yields for
three-year bonds were higher than those for five-year bonds. Ben Levisohn of Barron’s explained:
“Usually
when people talk about an inversion, they’re talking about the difference
between two-year and 10-year Treasuries, or three-month and 10-year Treasuries,
which have been useful, though not perfect, predictors of recessions and bear
markets. Last week, though, everyone was talking about the three-year and the
five-year Treasury inverting – something that usually doesn’t get much
notice…And for good reason.”
Historically, these maturities have inverted
seven times. In one instance, the country was already in recession. On the
other six occasions, recession didn’t occur for more than two years. Barron’s reported the Standard &
Poor’s 500 Index gained an average of 20 percent over the 24-month periods
following these inversions.
Investors’ negative response to last week’s news may have
been overdone. Financial Times
reported European and Asian markets firmed up a bit Friday “…as buyers stepped
back in after some savage falls on Thursday.”
Data as of 12/7/18
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
-4.6%
|
-1.5%
|
-0.2%
|
8.2%
|
7.8%
|
11.2%
|
|
Dow Jones Global ex-U.S.
|
-2.2
|
-14.2
|
-11.3
|
2.6
|
-0.4
|
5.2
|
|
10-year Treasury Note (Yield Only)
|
2.9
|
NA
|
2.4
|
2.2
|
2.9
|
2.7
|
|
Gold (per ounce)
|
2.1
|
-4.1
|
-0.9
|
4.9
|
0.1
|
5.0
|
|
Bloomberg Commodity Index
|
1.1
|
-5.3
|
-0.4
|
1.6
|
-7.9
|
-2.7
|
|
DJ Equity All REIT Total Return Index
|
0.3
|
4.4
|
5.1
|
8.0
|
10.1
|
13.7
|
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.
about
time and money. Elizabeth Dunn, associate psychology professor at
the University of British Columbia in Vancouver, Canada, and Michael Norton,
associate marketing professor at Harvard Business School, have been studying
whether people should spend money differently. Their goal is to figure out how
to get the most happiness for the dollars spent. In Happy Money: The Science of Happier Spending, they explained their
experiments:
“…We started doling out money to
strangers. But there was a catch: rather than letting them spend it however
they wanted, we made them spend it how we
wanted…changing the way people spent their money altered their happiness over
the course of the day. And we saw this effect even when people spent as little
as $5…Shifting from buying stuff to buying experiences, and from spending on
yourself to spending on others, can have a dramatic impact on happiness.”
In addition, buying time can improve happiness. How do you
buy time? By paying someone else to do tasks you don’t like to do – cleaning,
grocery shopping, home maintenance, and other tasks. This can relieve time
pressure and free up time to do what you really want to do – and that can make
you happier.
The authors suggest individuals ask a simple question before
making any purchase: How will this purchase change the way I use my time? Make
sure the answer aligns with the goal of having an abundance of time.
Weekly Focus – Think About It
“Happiness is when what you think, what you say, and what
you do are in harmony.”
--Mahatma Gandhi, Leader of Indian independence movement
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.barrons.com/articles/the-latest-jobs-report-will-tie-the-feds-hands-next-year-1544208693?mod=hp_DAY_1
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-10-18_Barrons-Its_the_Stock_Market_Stupid-Footnote_1.pdf)
https://www.economist.com/finance-and-economics/2018/12/08/a-trade-truce-between-america-and-china-is-over-as-soon-as-it-began
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-10-18_TheEconomist-A_Trade_Truce_Between_America_and_China_is_Over_as_Soon_as_it_Began-Footnote_2.pdf)
https://www.barrons.com/articles/dow-drops-4-5-but-the-market-is-probably-overreacting-1544234320?mod=hp_DAY_6
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-10-18_Barrons-Dow_Drops_4.5_Percent_as_the_Market_Panics_Over_Everything-Footnote_3.pdf)
https://www.ft.com/content/2cda1c8a-f9be-11e8-8b7c-6fa24bd5409c
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-10-18_FinancialTimes-Trade_War_Concerns_Keep_US_Stocks_Under_Pressure-Footnote_4.pdf)
https://www.simonandschuster.com/books/Happy-Money/Elizabeth-Dunn/9781451665079
(Click on About the Author)
