“Peek of the Week”
Market Commentary
Market Commentary
May 28, 2019
The Markets
U.S. stocks have had a great run.
During the past decade, the profitability of U.S. companies
increased rapidly. Strong corporate earnings helped the U.S. stock market outperform
markets in other nations by a significant margin. According to Capital Economics, “Since the start of
this decade, the average annual return from the MSCI USA index of mid- and
large-capitalization U.S. equities, which closely tracks the S&P 500, has
been roughly 13 percent. This compares to only 7 percent from the MSCI World ex
USA index of comparably-sized equities in 22 other developed economies.” Performance
was measured in local currency.
Through the end of April, year-to-date returns for U.S. benchmark
indices were soaring. T. Rowe Price
reported, “Stocks recorded solid gains in April, continuing their strong start
to the year. The S&P 500 and Nasdaq Composite Indexes hit new all‑time
highs at the end of the month, while the other major benchmarks remained
modestly below the peaks they established in the fall of 2018…Renewed
confidence in the global economy seemed to be a primary factor boosting
sentiment in April.”
Since early May, when trade discord resumed between the United
States and China, major U.S. stock indices have lost value. Ben Levisohn of Barron’s reported the Dow Jones
Industrial Average has fallen 3.5 percent since May 5, the Standard &
Poor’s 500 Index is down 4.1 percent, and the Nasdaq Composite has surrendered
6.5 percent.
There are reasons to believe stock performance may not be as
strong in the future. Last week, there were signs U.S. and global economies may
be slowing. Randall Forsyth of Barron’s
reviewed some indicators. “Long-term U.S. Treasury yields…fell on Thursday to
their lowest levels since October 2017, before ticking up on Friday. At the
same time, copper and crude-oil prices fell on the week. Those indicators of
economic weakness were underscored by a drop in the flash IHS Markit Purchasing
Managers Indexes to a shade above 50, the dividing line between expansion and
contraction for the economy. Whatever the factors at work, the U.S. economy is
slowing.”
The Federal Reserve Bank of Atlanta’s May 24 GDPNow forecast,
which is a weekly estimate of potential economic growth for the year, projected
the U.S. economy will grow 1.3 percent in 2019.
After a great decade and a stellar start to 2019, U.S. stock
markets may be cooling off.
Data as of
5/24/19
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard
& Poor's 500 (Domestic Stocks)
|
-1.2%
|
12.7%
|
3.6%
|
10.8%
|
8.1%
|
12.0%
|
|
Dow
Jones Global ex-U.S.
|
-0.7
|
6.6
|
-9.6
|
5.0
|
-0.6
|
4.0
|
|
10-year
Treasury Note (Yield Only)
|
2.3
|
NA
|
3.0
|
1.9
|
2.5
|
3.5
|
|
Gold
(per ounce)
|
0.1
|
0.1
|
-1.7
|
1.2
|
0.1
|
3.1
|
|
Bloomberg Commodity Index
|
-1.2
|
2.6
|
-14.0
|
-2.2
|
-10.3
|
-4.2
|
|
FTSE Nareit All Equity
REITs TR
|
0.1
|
19.1
|
19.9
|
8.5
|
9.3
|
16.4
|
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; the FTSE
Nareit All Equity REITs TR USD 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.
It’s not capture the flag. Like competitive gaming and Ultimate Frisbee, some may
categorize pillow fighting as an activity rather than a sport. Jack Tarrant and
Yoko Kono of Reuters described the
last week’s All Japan Pillow Fighting Championship qualifier in Shizuoka
Prefecture in this way:
“A
mix between dodgeball and chess, the aim is to protect each team’s ‘King’ from
being hit by pillows whilst trying to hit the opposition’s ‘King’ during
two-minute sets. One player on each team can also use a duvet as a shield.”
Japan
isn’t the only country to embrace pillow fighting. Since 2008, when International
Pillow Fight Day was established, annual pillow fights have been launched in
cities around the world, according to Awareness
Days. Since the first World Pillow Fight Day in March 2008, the activity
has gained popularity “…with pillow fighting flash mobs fighting it out in more
and more cities every year…”
NOTE:
Pillow fighting is not without risk. In 2015, West Point banned its annual
pillow fight after 30 participants were injured.
Weekly Focus – Think About
It
“The
first colleges to make sports a major part of student life, in addition to the
Ivies, were the military academies. They did so for some of the same reasons as
the elite schools – athletics instilled character, etc. – but also because Army
and Navy endorsed the old General Wellington idea that battles were won and
lost on the playing fields of youth. The better the sports program, they
reasoned, the better the soldier…”
--Steven
Stark, Cultural commentator
Best regards,
Leif M. Hagen
Leif M. Hagen, CLU, ChFC
LPL Financial Advisor
Leif M. Hagen, CLU, ChFC
LPL Financial Advisor
P.S. Please feel free to forward this commentary
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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 FTSE Nareit All Equity REITs Index tracks the performance of the U.S. Real
Estate Investment Trust (REIT) industry at both an industry-wide level and on a
sector-by-sector basis.
*
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.
* IHS Markit is a
London-based global information provider that was formed in 2016 when
Information Handling Services, Inc. and Markit Ltd. merged. It combines
information and analytics to provide solutions for business, finance, and
government.
* The Purchasing
Managers’ Index (PMI) is a
measure of the prevailing direction of economic trends in manufacturing and is based
on a monthly survey of supply chain managers across 19 industries covering both
upstream and downstream activity.
*
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://research.cdn-1.capitaleconomics.com/faf89b/relentless-outperformance-of-us-equities-likely-to-end.pdf (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-28-19_Capital_Economic_Global_Markets_Update-Footnote_1.pdf)
https://www.barrons.com/articles/dow-jones-industrial-average-drops-for-fifth-straight-week-51558749330?mod=hp_DAY_3 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-28-19_Barrons-The_Dow_Celebrates_Five_Weeks_of_Futility-Footnote_3.pdf)
https://www.barrons.com/articles/trade-talks-take-an-ominous-new-turn-51558747006?mod=hp_DAY_1 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-28-19_Barrons-The_Trade_War_Takes_an_Ominous_New_Turn-Footnote_4.pdf)
