“Peek of the Week”
Market Commentary
January 22, 2019
The Markets
We’re
off to a good start.
Investors
who remained steady during December’s wild ride are probably pleased with their
decision as stocks have gotten off to a strong start in 2019. Unfortunately, those
who reduced their exposure to the asset class may be feeling the sting of
missed opportunity.
Last
week, the Dow Jones Industrial Average gained about 3 percent. The Index is up
5.9 percent year-to-date, which is its best start in more than a decade,
according to Ben Levisohn of Barron’s.
The Standard & Poor’s 500 Index (S&P 500) and NASDAQ Composite also
moved higher last week.
Barron’s reported investors were encouraged by positive news
about trade talks between the United States and China, as well as
stronger-than-expected fourth quarter earnings. Eleven percent of S&P 500
companies have reported so far and, altogether, their earnings have beaten
expectations by 3.2 percent, according to FactSet.
(Quarterly earnings indicate how profitable a company was during the period being
reported.)
The
FTSE All-World Index also moved higher last week. It is up almost 8.5 percent
for the year.
Richard
Henderson, Emma Dunkley, and Robin Wigglesworth of Financial Times offered the opinion investors could have been
overly pessimistic during December, and their change in attitude might be
attributed to a more dovish tone at the U.S. Federal Reserve, as well as
evidence the U.S. economy remains strong.
While
investor confidence appears to be strengthening, consumer confidence wavered. The
University of Michigan Survey of
Consumers showed consumer confidence was lower in January 2019 than it was
in January 2018. The Survey’s Chief Economist Richard Curtin wrote, “The loss
was due to a host of issues including the partial government shutdown, the
impact of tariffs, instabilities in financial markets, the global slowdown, and
the lack of clarity about monetary policies.”
Data as of
1/18/19
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500 (Domestic Stocks)
|
2.9%
|
6.5%
|
-4.6%
|
12.4%
|
7.7%
|
12.7%
|
Dow Jones Global ex-U.S.
|
1.3
|
5.2
|
-15.9
|
7.5
|
-0.2
|
5.6
|
10-year Treasury Note (Yield Only)
|
2.8
|
NA
|
2.6
|
2.0
|
2.8
|
2.4
|
Gold (per ounce)
|
-0.4
|
0.2
|
-3.6
|
5.6
|
0.5
|
4.4
|
Bloomberg Commodity Index
|
2.2
|
6.1
|
-8.2
|
3.4
|
-8.3
|
-3.0
|
DJ Equity All REIT Total
Return Index
|
2.0
|
6.2
|
7.4
|
8.3
|
9.0
|
15.8
|
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, 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.
how much would those burgers cost in britain?
Purchasing power parity, or PPP, is a
straightforward idea with a tongue twister of a name. When two countries have
PPP, people pay the same amount for the same goods, after adjusting for the exchange
rate. For example, if one British pound is worth 50 U.S. cents, then an item
that costs one British pound in the United Kingdom should cost 50 cents in the
United States.
The Economist developed ‘The Big Mac Index’ to measure burger
parity. It’s an engaging way to look at local prices and exchange rates. The index
measures the price of the seven-ingredient, double-decker burger in different
countries and offers a rough estimate of whether a country’s currency is
overvalued or undervalued relative to the U.S. dollar.
In
January 2019, the index served up the news that almost every currency, in
developed and emerging economies, is undervalued relative to the U.S. dollar. The
only countries with currencies that appear to be overvalued are Switzerland,
Norway, and Sweden.
So,
how undervalued are other countries’ currencies?
- The Canadian dollar is 8.9 percent undervalued
- The European Union’s euro is 16.8 percent undervalued
- The British pound is 27 percent undervalued
- The Chinese yuan is 45.3 percent undervalued
- The Russian ruble is 70.4 percent undervalued
The Economist explained, “It is not unusual for emerging-market currencies to look weak in our index. But, today the dollar towers over rich and poor alike. The pound, for example, looked reasonably priced five years ago. Today, Americans visiting Britain will find that [burgers] are 27 percent cheaper than at home.”
The
U.S. dollar is stronger than usual because higher interest rates and tax cuts
made American assets more attractive to investors than other assets in 2018,
reported The Economist.
A
strong dollar is a boon to travelers, who get more for their money in other
countries. It also can make imports from other countries more attractive
price-wise. There are disadvantages to a strong dollar, too. For example, it
makes the United States a more expensive destination for travelers from other
countries, which could discourage tourism. In addition, a strong dollar makes
exports more expensive and that could make U.S. goods less competitive in
overseas markets.
Weekly Focus – Think About
It
“Wealth
begins in a tight roof that keeps the rain and wind out; in a good pump that
yields you plenty of sweet water; in two suits of clothes, so to change your
dress when you are wet; in dry sticks to burn; in a good double-wick lamp; and
three meals; in a horse, or a locomotive, to cross the land; in a boat to cross
the sea; in tools to work with; in books to read; and so, in giving, on all
sides, by tools and auxiliaries, the greatest possible extension to our powers,
as if it added feet, and hands, and eyes, and blood, length to the day, and
knowledge, and good-will.”
--Ralph Waldo
Emerson, American writer
Best regards,
Leif M.Hagen
Leif M. Hagen, CLU, ChFC
LPL Financial Advisor
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Securities
offered through LPL Financial, Member FINRA/SIPC.
*
These views are those of Carson Group 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 Group Coaching. Carson Group 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 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.
*
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.
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Sources:
https://www.barrons.com/articles/dow-gains-3-for-its-best-start-since-1997-51547857364?mod=hp_DAY_10
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-22-19_Barrons-Dow_Gains_3_Percent_for_Its_Best_Start_Since_1997-Footnote_1.pdf)
https://www.ft.com/content/e5e72cbc-157b-11e9-a581-4ff78404524e
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-22-19_FinancialTimes-Markets_Get_their_Groove_Back_after_Chaotic_End_to_the_Year-Footnote_4.pdf)
http://www.sca.isr.umich.edu (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-22-19_SurveysOfConsumers-January_2019_Consumer_Confidence-Footnote_5.pdf)
https://www.economist.com/news/2019/01/10/the-big-mac-index
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-22-19_TheEconomist-The_Big_Mac_Index-Footnote_6.pdf)
https://www.economist.com/graphic-detail/2019/01/12/the-big-mac-index-shows-currencies-are-very-cheap-against-the-dollar (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-22-19_TheEconomist-The_Big_Mac_Index_Shows_Currencies_are_Very_Cheap_Against_the_Dollar-Footnote_7.pdf)
https://emersoncentral.com/texts/the-conduct-of-life/wealth/ (Click on Show More)
