“Peek
of the Week”
Weekly Market Commentary
March 11, 2019
The Markets
Markets
were rattled last week.
The
market hates surprises, especially when the surprise comes from a central bank.
Last week, the European Central Bank (ECB) unexpectedly reversed course and
took a more accommodative stance on monetary policy in an effort to encourage
stronger European economic growth. Tom Fairless of Barron’s explained:
“Officials
are seeking to shore up an economy that has been rattled by shocks ranging from
a slowdown in China to mass protests in France and bottlenecks in Germany’s
crucial auto industry. They are threading a careful path between providing
sufficient support for the region’s softening economy while avoiding any
appearance of panic, which could ricochet through financial markets.”
The
Eurozone isn’t the only region feeling the pinch of weaker economic growth.
China’s exports were down more than 20 percent in February, reported Investing.com. Analysts had expected a
decline of about 5 percent. Concerns about the health of China’s economy have
been growing since the publication of ‘A Forensic Examination of China’s
National Accounts’ by the Brookings
Institute. The authors concluded:
“First,
nominal GDP [gross domestic product*] growth after 2008 and particularly after
2013 is lower than suggested by the official statistics. Second, the savings
rate has declined by 10 percentage points between 2008 and 2016. The official
statistics suggest the savings rate only declined by 3 percentage points
between these two years. Third, our statistics suggest that the investment rate
has [fallen] by about 3 percent of GDP between 2008 and 2016. Official
statistics suggest that the investment rate has increased over this period.”
*Gross domestic
product is the monetary measure of the market value of all goods and
services produced annually in the country.
As if that weren’t enough, the U.S. jobs
report for February reported far fewer jobs had been created than was expected.
It
will come as little surprise to learn that major U.S. stock indices moved lower
last week.
Data as of
3/8/19
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
-2.2%
|
9.4%
|
0.2%
|
11.5%
|
7.9%
|
15.0%
|
|
Dow Jones Global ex-U.S.
|
-1.8
|
7.1
|
-10.6
|
6.1
|
0.1
|
7.9
|
|
10-year Treasury Note (Yield Only)
|
2.6
|
NA
|
2.9
|
1.8
|
2.8
|
2.9
|
|
Gold (per ounce)
|
-1.2
|
1.2
|
-1.8
|
0.8
|
-0.7
|
3.5
|
|
Bloomberg Commodity Index
|
-0.6
|
4.9
|
-8.1
|
0.9
|
-9.9
|
-2.6
|
|
DJ Equity All REIT Total
Return Index
|
0.2
|
12.1
|
16.6
|
8.7
|
9.4
|
19.9
|
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 do you reconcile the beige book and
the labor report? If you have never
heard of the Beige Book, it’s a
scintillating tale of business and economics published by the Federal Reserve.
Okay,
maybe it’s not scintillating, but it has some pretty interesting stories.
The
March 2019 installation – it’s published eight times a year – includes real
world stories about businesses and workers gathered by Federal Reserve Banks
across the nation. For instance, the St.
Louis Federal Reserve reported their contacts in higher education reported
falling enrollment. It seems more potential college and post-graduate students
have been choosing to go straight into the workforce.
The
Beige Book reported, across the nation,
“Labor markets remained tight for all skill levels, including notable worker
shortages for positions relating to information technology, manufacturing,
trucking, restaurants, and construction. Contacts reported labor shortages were
restricting employment growth in some areas.”
Of
course, labor is easier to come by in some districts than in others. The Boston Federal Reserve reported contacts
in its district have a hard time finding skilled workers in fields like
information technology, but retail businesses are having no trouble filling
jobs.
Wages
have been going up in the Cleveland
Federal Reserve’s district. “Bankers raised wages both for low-wage and for
high-wage positions, citing competitive labor markets. A couple of construction
companies granted large retention-focused merit increases to office staff, but
other companies mentioned that they tended to grant raises during busier
seasons.”
Hiring
was up in the San Francisco Federal
Reserve’s territory. “Employment at a large San Francisco software and
consulting company grew notably as demand for its services increased. A cattle
ranching company in Arizona also increased employment to meet growing demand.
In the Mountain West, a regional bank noted that its hiring was limited only by
a shortage of qualified labor.”
In
light of last week’s incredibly weak jobs report, the Beige Book’s findings seem odd that companies are having trouble
hiring enough workers and are raising wages to attract them. How can so few
jobs have been created when there is high demand for labor? (Economists’ rule
of thumb is 100,000 jobs are needed to accommodate people entering the labor
force each month, according to MarketWatch.)
An
economist cited by MarketWatch
commented, “One poor report should not set off alarm bells, but given that the
labor market is the linchpin for the entire economy, it does add to existing
concerns and raises the stakes for next month’s report.”
Weekly Focus – Think About
It
“Hard
work spotlights the character of people: some turn up their sleeves, some turn
up their noses, and some don't turn up at all.”
--Sam Ewing, Professional
baseball player
Best regards,
Leif M. Hagen
Leif
M. Hagen, CLU, ChFC
LPL
Financial Advisor
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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
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*
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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.
*
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system.
*
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are often heightened for investments in emerging markets.
*
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between two specific periods.
*
Opinions expressed are subject to change without notice and are not intended as
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*
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.
*
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