“Peek of the Week”
Market Commentary
April 8, 2019
The Markets
The
first quarter of 2019 brought a welcome reversal.
Last
year, Barron’s published a group of
market strategists’ expectations for 2019 performance. The article came out in
mid-December, before the steep year-end stock market decline. At that time, all
of the strategists agreed: The S&P 500 Index would move higher during 2019.
Their
expectations appeared to be wildly optimistic when the Index lost 3.5 percent
during the last two weeks of 2018, and finished the year down 6.2 percent.
Overall,
at the end of 2018, strategists expected the Index to reach 2,975 by year-end
2019. Despite starting 2019 at a lower level than many anticipated, the Index
finished last week at 2,892, a gain of about 15.4 percent year-to-date, and 83
points from strategists’ full-year performance expectations.
While
the U.S. stock market has delivered attractive returns year-to-date, suggesting
investors anticipate strong economic growth ahead, the bond market has been
telling a different story.
Late
in the first quarter, the yield curve inverted, which means the yield on
short-term Treasury bonds was higher than the yield on long-term Treasury
bonds. Inverted yield curves are unusual because investors normally want to
earn a higher yield when they lend their savings for longer periods of time.
In
some cases, inverted yield curves have been a sign that recession is ahead.
That may not be the case this time, reported Eva Szalay of Financial Times. It seems the extreme measures taken by central
banks following the financial crisis may have undermined the yield curve’s
predictive value:
“…according
to a new piece of research from Pictet Wealth Management, the curve has been
sending out misleading signals for a while. The distortions created by
extraordinary post-crisis monetary policies have led to the breakdown in the
relationship between interest rate expectations and economic growth, the firm
argues…Since central banks have injected vast amounts
of liquidity into their respective economies to compensate for lackluster
growth, long-term interest rates have become artificially compressed…So the old
rule no longer applies.”
The yield curve has since righted itself.
While recession may not be imminent, there are signs economies
around the world are growing more slowly. Capital
Economics reported, “World GDP [gross domestic product] growth seems to
have slowed sharply in Q1, but the latest business surveys suggest that growth
has bottomed out in some parts of the world at least…there are very few signs
of improvement in the euro-zone and the United States has clearly been
suffering from previous interest rate hikes and the fading fiscal boost. Those
hoping for an imminent rebound in global growth are therefore likely to be
disappointed.”
Slowing
growth isn’t a sign recession is imminent in the United States. Last week’s
jobs report suggests the American economy is still healthy, reported Tim
Mullaney of MarketWatch, even if it
is puttering along at a slower pace than many would like.
Data as of
4/5/19
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500 (Domestic Stocks)
|
2.1%
|
15.4%
|
8.6%
|
12.3%
|
9.4%
|
13.2%
|
Dow Jones Global ex-U.S.
|
2.0
|
11.6
|
-5.5
|
7.2
|
0.9
|
6.1
|
10-year Treasury Note (Yield Only)
|
2.5
|
NA
|
2.8
|
1.7
|
2.7
|
2.9
|
Gold (per ounce)
|
-0.5
|
0.5
|
-3.0
|
1.5
|
-0.2
|
4.0
|
Bloomberg
Commodity Index
|
1.6
|
7.4
|
-5.5
|
2.3
|
-9.4
|
-3.0
|
DJ
Equity All REIT Total Return Index
|
1.0
|
18.4
|
21.1
|
8.5
|
10.1
|
17.2
|
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.
exercise is important – really
important – but don’t get too much. Researchers tested the relationship between mental health and exercise
by collecting self-reported data from 1.2 million Americans. They discovered
exercise – including everything from childcare and housework to weight lifting
and running – can improve mental health.
Americans
who were active tended to be happier and experienced poor mental health about
35 days a year. In contrast, those who remained inactive felt bad emotionally
about 53 days a year, reported Entrepreneur.com.
Exercising in a social setting – team sports, classes, and group cycling, for
instance – appeared to deliver the biggest mental health benefits.
The
study’s findings indicated it might be possible to exercise too much. “Exercising
for 30-60 minutes was associated with the biggest reduction in poor mental
health days…Small reductions were still seen for people who exercised more than
90 minutes a day, but exercising for more than three hours a day was associated
with worse mental health than not exercising at all. The authors note that people
doing extreme amounts of exercise might have obsessive characteristics which
could place them at greater risk of poor mental health.”
If
you’re not exercising regularly, you may want to find ways to include it in
your day.
Weekly Focus – Think About
It
“I
have always tried to put my kids first, and then…put myself a really close
second, as opposed to fifth or seventh. One thing that I've learned from male
role models is that they don't hesitate to invest in themselves, with the view
that, if I'm healthy and happy, I'm going to be a better support to my spouse
and children. And I've found that to be the case: Once my kids were settled,
the next thing I did was take care of my own health and sanity. And made sure
that I was exercising and felt good about myself. I'd bring that energy to
everything else that I did, the career, relationship, on and on and on.”
--Michelle
Obama, Former First Lady of the United States
Best regards,
Leif M. Hagen
Leif
M. Hagen, CLU ChFC
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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/u-s-stocks-could-rally-more-than-10-in-2019-51544837183 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-08-19_Barrons-2019_Outlook-US_Stocks_Could_Rally_About_10_Percent-Footnote_1.pdf)
https://finance.yahoo.com/quote/^GSPC?p=^GSPC (Historical data)
https://www.ft.com/content/15d4048e-552f-11e9-91f9-b6515a54c5b1 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-08-19_FinancialTimes-Why_the_Yield_Curve_is_Not_the_Economic_Guide_It_Once_Was-Footnote_6.pdf)
https://www.capitaleconomics.com/publications/global-economics/global-economics-chart-book/divergent-surveys-offer-limited-hope/ (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-08-19_CapitalEconomics-Global_Economics_Chart_Book-Footnote_7.pdf)
https://www.marketwatch.com/story/the-jobs-report-nails-it-its-a-slowdown-not-a-recession-2019-04-05
