Monday, August 12, 2019

Bond yields in negative territory


“Peek of the Week”
Market Commentary
August 12, 2019

The Markets

Global selloff. Quick comeback.

Investors boomeranged from stocks to safe havens and back as trade tensions between the United States and China intensified last week. The Economist reported:

“On August 1st President Donald Trump warned that he would soon impose a 10 percent levy on roughly $300bn-worth of Chinese goods that have not already been hit by the trade war. Four days later China responded by giving its exchange rate unaccustomed freedom to fall. The yuan weakened past seven to the dollar, an important psychological threshold, for the first time in over a decade. And stock prices in America duly fell...”

Asia Times explained, “Beijing has signaled that it is prepared to endure a long and debilitating trade war with the United States…A reported directive to Chinese companies to refrain from buying U.S. farm products seems an in-your-face challenge to the U.S. president.”

The possibility of a prolonged trade war triggered worries about global recession and set off a selloff. Global stock markets experienced the biggest one-day decline since February 2018, according to Bloomberg, and U.S. stocks delivered the worst one-day performance of 2019, reported MarketWatch.

Stocks staged an impressive recovery on Tuesday. Then, central banks in India, Thailand, and New Zealand announced unexpected rate cuts. The moves incited concern about the health of the global economy and stocks dropped again – and recovered again. By the end of the week, nearly all losses in U.S. stock markets had been erased.

If recent volatility has triggered a desire to change your investments, please get in touch with us before you do.


Data as of 8/9/19
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
-0.5%
16.4%
2.3%
10.2%
8.6%
11.2%
Dow Jones Global ex-U.S.
-1.3
6.3
-7.7
2.9
-0.5
2.7
10-year Treasury Note (Yield Only)
1.7
NA
2.9
1.6
2.4
3.8
Gold (per ounce)
3.9
16.9
23.3
3.8
2.8
4.7
Bloomberg Commodity Index
0.3
0.9
-8.8
-2.6
-9.5
-5.0
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; 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, MarketWatch, 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.

can you believe it? The global bond market deserves a spot in a believe-it-or-not museum, right next to the bathythermograph, radioactive vodka (brewed with Chernobyl grain), and 526 extra teeth recently removed from a youngster’s jaw.

Here’s why: Approximately one-fourth of all bonds issued by governments and companies around the globe are trading at negative yields, according to an index cited by The Economist.

Just imagine. You want to borrow money. An acquaintance agrees to lend you the money and then offers to pay you for borrowing it.

It sounds like a Monty Python skit, right?

It’s not. All over the world, bonds issued by governments and companies are offering negative interest rates. Investors who purchase the bonds are paying governments and companies to borrow their money. For instance, in Germany, investors are paying one-half of a percentage point annually for the assurance their money will be returned when the bond matures.

Why are so many bond yields in negative territory?

Strangely enough, retirement and longevity may play a role. Joachim Fels of PIMCO theorized a ‘savings glut’ could be the reason for low and negative yields. He explained:

“…it can be argued that in affluent societies where people can expect to live ever longer and thus spend a significant amount of their lifetimes in retirement, more and more people demonstrate negative time preference, meaning they value future consumption during their retirement more than today’s consumption…they are thus willing to accept a negative interest rate and bring it about through their saving behavior.”

We live in interesting times.

Weekly Focus – Think About It

“Why do you go away? So that you can come back. So that you can see the place you came from with new eyes and extra colors. And the people there see you differently, too. Coming back to where you started is not the same as never leaving.”
--Sir Terence David John Pratchett, English author

Best regards,

Leif M. Hagen
Leif M. Hagen, CLU ChFC
LPL Financial Advisor

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

Securities offered through LPL Financial Member FINRA/SIPC.




* These views are those of Carson Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* 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.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* 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 Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* 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.
* Stock investing involves risk including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the “Peek of the Week” please reply to this email with “Unsubscribe” in the subject line or write us at: Hagen Financial Network, Inc.; 4640 Nicols Rd – Suite 203; Eagan, MN 55122.

Sources:


Monday, August 05, 2019

Survival and success are not the same


“Peek of the Week”
Market Commentary
August 5, 2019

The Markets

Tariffs strike again.

The Federal Open Market Committee completed what it called ‘a mid-cycle adjustment’ with a quarter-point rate cut last week. Some investors were unhappy when Fed officials implied there would not be another reduction this year. They’d been hoping for at least one, reported Barron’s.

Despite the disappointment, investors settled and U.S. stock markets rallied on Thursday.

Then, like a movie villain that just won’t die, U.S. import taxes – a.k.a. tariffs – reared their ugly heads and wiped out the week’s gains. Barron’s explained:

“By midday on Thursday, the stock market had all but recouped its losses in the wake of the Federal Reserve’s policy meeting the previous day. That’s when President Donald Trump announced that he will impose a 10 percent levy on an additional $300 billion of Chinese goods on September 1. The shock sent stocks underwater and resulted in this year’s worst week for the S&P 500 index and the Nasdaq Composite, which slid 3.1 percent and 3.92 percent, respectively. The Dow got off with just a 2.6 percent nick. For the broad U.S. stock market, the paper loss was about $1.1 trillion, according to Wilshire Associates.”

Tariffs have pummeled U.S. and Chinese economies for months. Early estimates suggest imports from China to the United States fell by 12.6 percent from June 2018 to June 2019, while exports from the United States to China fell by 16.8 percent during the same period, according to a source cited by Barron’s.

Bond investors were jolted by the tariff announcement, too. The yield on 10-year U.S. Treasury notes dropped from 2.1 percent last week to 1.9 percent, reported MarketWatch. In Germany, all maturities of government bonds are offering negative yields.

In the face-off between rate cuts and tariffs, tariffs may prove to have a greater impact.


Data as of 8/2/19
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
-3.1%
17.0%
3.7%
10.8%
8.6%
11.3%
Dow Jones Global ex-U.S.
-3.0
7.7
-5.9
3.9
-0.4
2.8
10-year Treasury Note (Yield Only)
1.9
NA
3.0
1.5
2.5
3.6
Gold (per ounce)
1.5
12.5
18.6
1.9
2.2
4.2
Bloomberg Commodity Index
-1.9
0.7
-8.6
-2.3
-9.6
-5.2
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; 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, MarketWatch, 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.

does flying trigger your lizard brain? Flight attendants and frequent fliers have some crazy stories to tell. Lets Fly Cheaper, Business Insider, and Point Me To The Plane reported on some of the strange things flight attendants have experienced, including:

·         Medicated sleep zombies. Passengers sometimes take sleep aids to slumber while flying. In one instance, a passenger sleep-streaked to first class.
·         Emotional support animals (ESAs). In an effort to remain calm while flying, some people bring pets for emotional support. These have included a turkey, a pig, a monkey, and a kangaroo.
·         Impatient passengers. In 2014, a passenger deployed the emergency slide because he wanted to disembark more quickly.
·         Strange requests. Flight attendants report passengers have asked how to roll down plane windows, if they could stop at the Sky Mall, and whether they could borrow a screwdriver to take a seat apart.

A flight attendant told NPR, “When people get on a plane, they revert to a lizard brain where they forget all social decencies and common sense…Flying takes away everybody's sense of control. So people tend to grasp at whatever kind of control they can have…”

There may be a scientific explanation for passengers’ odd plane behavior. NPR reported that low air pressure reduces the oxygen in passengers’ blood, making them more emotional and more prone to poor decision-making.

Weekly Focus – Think About It

“The lizard brain is not merely a concept. It's real, and it's living on the top of your spine, fighting for your survival. But, of course, survival and success are not the same thing.”
--Seth Godin, American author

Best regards,

Leif M. Hagen
Leif M. Hagen, CLU, ChFC
LPL Financial Advisor

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

Securities offered through LPL Financial, Member FINRA/SIPC.



* These views are those of Carson Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* 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.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* 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 Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* 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.
* Stock investing involves risk including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the “Peek of the Week” please reply to this email with “Unsubscribe” in the subject line or write us at: Hagen Financial Network, Inc.; 4640 Nicols Rd – Suite 203; Eagan, MN, 55122.

Sources:


Monday, July 29, 2019

The certainty of small losses and the power of music


“Peek of the Week”
Market Commentary
July 29, 2019

The Markets

It has been said there are two sides to every story. Just look at world financial markets. Stock markets and bond markets are telling very different stories.

In the United States, stock markets were blue ribbon winners last week.

The Standard & Poor’s 500 Index rebounded to a record high. The Nasdaq Composite also set a new record. Barron’s reported U.S. stock markets were supported by abundant optimism inspired by expectations for solid earnings growth and a Federal Reserve rate cut in July.

Optimism pushed stocks higher in Europe last week, too. CNBC reported investors were receptive to news suggesting the European Central Bank would ease monetary policy to support the European economy. A significant number of national stock indices in Europe, the Middle East, and Asia finished last week higher, according to Barron’s.

Bond markets have been telling a less optimistic story.

In many regions of the world, bond yields have sunk below zero, and bond buyers have been locking in losses by investing in bonds with negative yields.

In the United States, the 10-year Treasury yield remains positive, but it has dropped from 3.2 percent in November 2018 to 2.1 percent at the end of last week.

So, what are bond markets saying? Barron’s suggested some possibilities:

“…bond buyers locking in subzero yields aren’t doing it, of course, for love of losses. They might think that the certainty of small losses will prove a better deal in the years ahead than whatever stocks provide…There’s something else that negative yields could be telling us. Investors need bonds for things like diversification and setting aside money at known rates to offset known liabilities. For an investor who must buy bonds, a purchase here with negative yields isn’t necessarily a bet against stocks. It could just be a wager that bond yields won’t get much better – that slow growth and meager inflation will loom for many years.”

Time will tell.


Data as of 7/26/19
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
1.7%
20.7%
6.6%
11.7%
8.9%
11.9%
Dow Jones Global ex-U.S.
-0.4
11.0
-4.3
5.3
-0.2
3.5
10-year Treasury Note (Yield Only)
2.1
NA
3.0
1.6
2.5
3.7
Gold (per ounce)
-1.3
10.8
15.6
2.4
1.7
4.1
Bloomberg Commodity Index
-0.8
2.6
-7.3
-2.0
-9.5
-4.4
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; 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, MarketWatch, 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.

music, earworms, and data storage. Anyone who has ever suffered an earworm (known in scientific circles as Involuntary Musical Imagery) understands the power of music. Some tunes that repeatedly pop into people’s heads may include:

·         It’s a Small World (Disney)
·         Don’t Stop Believing (Journey)
·         Who Let the Dogs Out? (Baha Men)
·         Silver Bells (Bing Crosby)
·         We are the Champions (Queen)

Let’s face it. Music can be potent. In The Power of Music, Elena Mannes writes, “…science today is showing that music is in fact encoded in our bodies and brains.” She discusses research suggesting music may be able to help people heal, change behavior, and treat neurological disorders.

It may be used in other ways, too. Soon, you may experience a new music phenomenon called Imperceptible Audio Communication. That’s when data is secretly coded into music. You won’t be able to hear it, but your smartphone and other devices will.

At the 44th IEEE (Institute of Electrical and Electronics Engineers) International Conference on Acoustics, Speech and Signal Processing, a pair of doctoral students shared their work, which focuses on storing data in music.

Imagine, someday you may be:

·         Walking through an airport, not really listening to the piped-in sounds, when your phone picks up a data feed from the music and lets you know your flight is delayed.
·         Pushing your cart down a grocery aisle and Muzak® advises your smartphone cauliflower is on sale.
·         Checking into a hotel and having the lobby music send the Wi-Fi password and other check-in data directly to your smartphone.
·         Dancing in a club and having your smartphone flash a drink special.

The times – they are changing.

Weekly Focus – Think About It

“Any sufficiently advanced technology is indistinguishable from magic.”
--Arthur C. Clarke, British writer and inventor

Best regards,

Leif M. Hagen
Leif M. Hagen, CLU, ChFC
LPL Financial Advisor

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

Securities offered through LPL Financial, Member FINRA/SIPC.




* These views are those of Carson Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* 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.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* 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 Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* 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.
* Stock investing involves risk including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the “Peek of the Week” please reply to this email with “Unsubscribe” in the subject line or write us at: Hagen Financial Network, Inc.; 4640 Nicols Rd – Suite 203; Eagan, MN 55122.

Sources:

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