“Peek of the Week”
Market Commentary
Market Commentary
February 19, 2019
The Markets
Why
did the stock market do that?
The
great mystery of stock markets reared its head last week. With no clear driver,
the Dow Jones Industrial Average gained more than 3 percent, while the Nasdaq
Composite and Standard & Poor’s (S&P) 500 Index moved higher by about
2.5 percent. It was a puzzler. Ben Levisohn of Barron’s explained:
“Given
those gains, we’d expect a heaping helping of good news, but not much was
forthcoming. Earnings reports from [two large multinational companies] left
investors wanting. And economic data were either bad or terrible in the United
States – industrial production declined in January, the first drop in eight
months, while December’s retail sales fell the most for any month since 2009.
But who needs good news when the United States and China are reportedly making
progress on trade talks? Yes, the details remain a little fuzzy, but at least
the tone is more constructive.”
It
probably wasn’t just optimism about China that pushed markets higher. Consumer
Sentiment, which gauges Americans expectations for the economy, was up more
than 4 percent month-to-month. One driver of consumer optimism was relief the
government shutdown had ended. Another driver is a change in inflation
expectations, which are at the lowest level seen in half a century. Americans think
inflation will remain low and they anticipate wages will rise. The Federal
Reserve’s newly accommodative attitude hasn’t hurt, either.
Investor
sentiment was leaning bullish last week, too. Willie Delwiche of See It Market reported the Investor Intelligence survey of
financial advisors showed 49 percent bullish and 21 percent bearish. The AAII Investor Sentiment Survey reported bulls
(40 percent) edged bears (37 percent) by a neck. Those indicators were balanced
by the Daily Trading Sentiment Composite
from Ned Davis Research which suggested
optimism was too high.
When
markets rise, as they have during the past few weeks, it may be tempting to
take a more aggressive stance and tilt your portfolio toward U.S. stocks. This
may not be a good idea.
Data as of
2/15/19
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500 (Domestic Stocks)
|
2.5%
|
10.7%
|
1.6%
|
13.6%
|
8.6%
|
13.4%
|
Dow Jones Global ex-U.S.
|
1.5
|
7.3
|
-11.4
|
8.0
|
0.3
|
6.1
|
10-year Treasury Note (Yield Only)
|
2.7
|
NA
|
2.9
|
1.8
|
2.8
|
2.7
|
Gold (per ounce)
|
0.1
|
2.7
|
-2.6
|
2.9
|
-0.2
|
3.4
|
Bloomberg Commodity Index
|
1.1
|
5.5
|
-8.3
|
2.2
|
-9.1
|
-2.4
|
DJ Equity All REIT Total
Return Index
|
0.9
|
13.6
|
19.1
|
11.9
|
9.7
|
18.2
|
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; 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.
what’s in your wallet?
You’re at the checkout. How do you
pay for your purchase? Do you reach for a credit card, debit card, cash, check,
or some form of electronic payment, such as a mobile wallet or wearable?
The
Federal Reserve Bank of San Francisco’s 2018
Findings from the Diary of Consumer Payment Choice (DCPC) found participants
preferred to pay using debit cards. The order of payment preference was like
this:
Payment Type
|
Preference
|
Debit
cards
|
42
percent
|
Credit
cards
|
29
percent
|
Cash
|
24
percent
|
Check
|
2
percent
|
Other
methods
|
2
percent
|
PrePaid
|
1
percent
|
Here’s
an interesting side note. The more money a household earned, the more likely
they were to pay by credit card.
HH Earnings
|
Credit
|
Debit
|
Cash
|
$25,000
– 49,999
|
13
percent
|
29
percent
|
36
percent
|
$50,000
– 74,999
|
19
percent
|
31
percent
|
27
percent
|
$75,000
– 99,999
|
21
percent
|
29
percent
|
31
percent
|
$100,000
– 124,999
|
30
percent
|
23
percent
|
24
percent
|
$125,000
or more
|
33
percent
|
21
percent
|
24
percent
|
The
shift in preference begs the question: Do wealthier people have more debt? Some
do, but wealthier households are more likely to pay off credit card debt each
month, according to author Tom Corley who was cited by Credit.com writer Gerri Detweiler.
If
you use credit cards frequently and haven’t been paying down your balance each
month, it may be a good idea to do a simple calculation to determine how much
you are paying in interest each year. Just multiply the interest rate you pay
by the amount of debt you carry. The amount may surprise you. Nerdwallet’s American Household Credit Card Debt Study reported, “Households
with revolving credit card debt will pay an average of $1,141 in interest this
year.”
If
retirement is 10 years in the future, saving $1,141 a year, and earning 6
percent annually on the money, could provide about $16,000 in additional
savings. If retirement is 30 years away, you could increase your savings by
about $96,000. It’s food for thought.
Weekly Focus – Think About
It
“Wealth
consists not in having great possessions, but in having few wants.”
--Epictetus,
Greek philosopher
Best regards,
Leif M. Hagen
Leif M. Hagen, CLU, ChFC
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 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 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-rallies-for-eighth-straight-week-amid-china-optimism-51550281278?mod=hp_DAY_1
(or go
to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-19-19_Barrons-Dow_Gains_777_Points_Because_Sellers_Have_Become_Buyers-Footnote_1.pdf)
http://www.sca.isr.umich.edu (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-19-19_Univ_of_Michigan_Surveys_of_Consumers-Footnote_2.pdf)
http://www.moneychimp.com/calculator/compound_interest_calculator.htm
(or go
to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-19-19_Money_Chimp_Calculator-Footnote_7.pdf)
