Peek of the Week
“Market Commentary”
November 11, 2019
The Markets
Last
week, major United States stock indices finished at historic highs.
According
to a source cited by Barron’s, U.S. stock markets are responsible for
creating $6 trillion in paper wealth this year. ‘Paper’ wealth is
when an asset is estimated to be worth a specific amount. The wealth becomes
‘real’ when the asset is sold.
If
you’re having difficulty comprehending $6 trillion, imagine this: 3,786 miles
of stacked $100 bills. That’s about 15 times higher than the space station.
It’s roughly the distance of a drive from the East Coast to the West Coast of
the United States and about halfway back again.
To
date, 2019 has been an exceptional year for U.S. stocks. At the end of last
week, the Dow Jones Industrial Average was up 18.7 percent year-to-date, the
S&P 500 had gained 23.4 percent, and the Nasdaq Composite had risen 27.7
percent.
Returns
like these sometimes inspire investors to ignore their risk tolerance and
increase allocations to U.S. stocks. That may not be a wise move. In an article
titled, ‘How not to understand money,’ Financial Times explained:
“One
of the first things to know about equity investing is that stocks go up as well
as down, and even the most successful ones never go up in a straight skyward
trajectory.”
There
is a theory which holds that, over time, returns revert to the mean. Investopedia
describes the phenomenon like this:
“A
reversion to the mean involves retracing any condition back to a previous
state. In cases of mean reversion, the thought is that any price that strays
far from the long-term norm will again return, reverting to its understood
state.”
Since
the current U.S. bull market in stocks has delivered above average returns for
more than a decade, some analysts anticipate future returns may be less robust
as returns revert to the mean.
Suffice
it to say, it’s not a good idea to be lured into holding more stocks because
recent returns have been exceptional. Those returns are, after all, in the
past.
Data as of
11/8/19
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor’s 500 (Domestic Stocks)
|
0.9%
|
23.4%
|
10.2%
|
13.1%
|
8.7%
|
11.0%
|
Dow Jones Global ex-U.S.
|
0.8
|
14.3
|
6.9
|
6.1
|
2.0
|
2.5
|
10-year Treasury Note (Yield Only)
|
1.7
|
NA
|
3.2
|
1.9
|
2.4
|
3.5
|
Gold (per ounce)
|
-3.0
|
14.2
|
19.6
|
4.5
|
4.7
|
2.8
|
Bloomberg Commodity Index
|
-0.4
|
4.2
|
-4.0
|
-1.6
|
-7.3
|
-5.0
|
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; 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.
The
newest new math. If you learned ‘old’
math, you may find ‘new’ math bewildering, and that can make helping with
homework really challenging. It’s possible we’ll soon have an even newer math
curriculum.
Many
Americans learned old math: addition and subtraction, multiplication tables,
and long division. Some may have absorbed linear equations in algebra and
isosceles triangles in geometry. The new math entails a similar but different
skill set. For instance, new math requires students to:
·
Solve 12 times 37
using box multiplication
·
Answer 10 minus 7
using a 10-frame
·
Solve 57 minus 14
using base ten subtraction
·
Explain how to
decompose numbers
·
Solve word
problems using an open number line
If you are familiar with any of these new
problem-solving methods, congratulations! You are ahead of the curve.
Unfortunately,
the new math hasn’t been improving Americans’ performance on the Program for
International Student Assessment (PISA), a standardized test administered in 70
countries. In 2018, the U.S. placed 39th in math.
Jo
Boaler, the Nomellini-Olivier Professor of Mathematics Education at Stanford
University, and Steven Levitt, an economist and author, think we need to change
what we’re teaching. In an opinion piece in the Los Angeles Times, they wrote:
“What
we propose is as obvious as it is radical: to put data and its analysis at the
center of high school mathematics. Every high school student should graduate
with an understanding of data, spreadsheets, and the difference between
correlation and causality. Moreover, teaching students to make data-based
arguments will endow them with many of the same critical-thinking skills they
are learning today through algebraic proofs, but also give them more practical
skills for navigating our newly data-rich world.”
Get
ready for 21st century math!
Weekly Focus – Think About It
“Instead of
being like a circus where the trainer uses his stick to make animals do stunts
to serve the interest of the audience, the system of education should be like
an orchestra where the conductor waves his stick to orchestrate the music
already within the musicians’ hearts in the most beautiful manner. The teacher
should be like the conductor in the orchestra, not the trainer in the circus.”
--Abhijit Naskar, Neuroscientist and author
Best regards,
Leif
M. Hagen
Leif
M. Hagen, CLU, ChFC
LPL Financial Advisor
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, the Representative’s Broker/Dealer, or Registered Investment
Advisor, and should not be construed as investment advice.
*
This newsletter was prepared by Carson Coaching. Carson Coaching is not
affiliated with the named firm.
*
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. The volatility of indexes could be
materially different from that of a client’s portfolio. Unmanaged index returns
do not reflect fees, expenses, or sales charges. Index performance is not
indicative of the performance of any investment. You cannot invest directly in
an index.
*
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.
* 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/stocks-keep-hitting-record-highs-where-to-find-values-now-51573261145?mod=hp_DAY_1 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/11-11-19_Barrons-Stocks_Keep_Hitting_Record_Highs-Where_to_Find_Values_Now-Footnote_1.pdf)
https://ftalphaville.ft.com/2019/11/07/1573161957000/How--not-to-understand-money-/ (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/11-11-19_FinancialTimes-How_Not_to_Understand_Money-Footnote_5.pdf)
