“Peek of the Week”
Market Commentary
January 6, 2020
The Markets
About
face!
2019
was a remarkable year for investors with many asset classes delivering positive
performance. Both the Standard & Poor’s 500 Index, a gauge of U.S. stock market
performance, and the Dow Jones Global (ex U.S.) Index delivered double-digit increases
(see the below table). Bonds and gold rallied, too, delivering positive returns
for the year.
Possibly
the most important factor contributing to asset performance in 2019 was an
‘about face’ by the United States Federal Reserve. Axios reported:
“The
Fed’s 180-degree turn was the story of 2019, asset managers and market analysts
say…Chairman Jerome Powell and the U.S. central bank went from raising interest
rates for a fourth time at the close of 2018 and giving market watchers the
explicit expectation this would continue in 2019, to doing the opposite. The
Fed cut rates thrice and even began re-padding its balance sheet in the last
quarter of the year, bringing it back above $4 trillion.”
The
Fed’s policy decision gave investment markets a boost, however, it did little
to quell investors’ worries about potential recession and the impact of the U.S.-China
trade war, reported The Wall Street Journal. As a result, investors moved
money from U.S. stock markets into bonds and other investments they perceived
to be safer throughout the year.
During
the fourth quarter of 2019, U.S. markets delivered positive returns despite
uncertainty about the strength of the U.S. economy created by inconsistent
economic data. For example, the last jobs report of the year indicated
unemployment remained near a 50-year low. Yet, in 2019, workers experienced the
highest number of layoffs in a decade.
Many
layoffs during the year were the result of corporate bankruptcies, especially
in the retail sector. Investors who took time to evaluate the juxtaposition of
unemployment levels and layoffs may have recognized disruptions in the retail sector
has potential to create opportunities for investors.
A
closely watched indicator during 2019 was manufacturing. In December, Fox
News reported, “The ISM Manufacturing Index fell for the fifth month in a
row to 47.2 in December, down from November's reading of 48.1. That's the
weakest reading since June 2009, when it hit 46.3, and well below the 49
reading that economists surveyed by Reuters expected.”
One
of the reasons for weakness in manufacturing is the U.S.-China trade war. Late
in the fourth quarter, concerns about trade subsided after the announcement of
a phase one trade deal. The agreement is scheduled to be signed on January 15,
2020.
Continued
progress in resolving the trade war could help boost economic growth in the
United States. At the end of 2019, United States gross domestic product, the
value of all goods and services produced in the country, was expected to remain
slow and steady during 2020. However, forecasters at the Federal Reserve
Bank of Philadelphia expected the economies of nine states to contract
during the first six months of the new year.
From
a geopolitical perspective, the 2020s are beginning just like the last decade
did, with all eyes on Iran.
In
2009 and 2010, the Iranian Green Revolution captured the world’s attention as
social media provided insight to post-election turbulence and unrest in Iran.
Last week, the first of the new decade, all eyes were again on the Middle East as
tensions between the United States and Iran flared after the death of a top
Iranian military leader targeted by the United States.
After
rallying on the first day of the new decade, some major U.S. stock markets
declined on news of heightened tensions in the Middle East and concerns about the
potential consequences, such as the disruption of oil supplies.
Data as of
1/3/20
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500 (Domestic Stocks)
|
-0.2%
|
0.1%
|
32.2%
|
12.7%
|
9.9%
|
11.1%
|
Dow Jones Global ex-U.S.
|
0.2
|
0.4
|
19.7
|
7.4
|
3.8
|
2.6
|
10-year Treasury Note (Yield Only)
|
1.8
|
NA
|
2.6
|
2.5
|
2.0
|
3.3
|
Gold (per ounce)
|
2.5
|
1.7
|
20.0
|
10.4
|
5.2
|
3.3
|
Bloomberg Commodity Index
|
0.0
|
0.6
|
5.1
|
-1.9
|
-4.8
|
-5.4
|
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; 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
a decade! While some have called the 2010s a ‘lost decade’ because there was
little economic growth, we disagree with the assessment. The decade was filled
with remarkable events in politics, sports, science, pop culture, and other
areas of interest. Here are a few memorable events from the past decade:
·
NASA’s Voyager 1 probe
left the solar system. Launched in 1977 to explore
planets including Jupiter, Saturn, Uranus, and Neptune, the probe left our
solar system in 2013. It will continue to send data until 2025.
·
The Patient
Protection and Affordable Care Act was signed into law. The controversial law, which Encyclopedia Britannica reported,
“required most individuals to secure health insurance or pay fines, made
coverage easier and less costly to obtain, cracked down on abusive insurance
practices, and attempted to rein in the rising costs of health care,” remains
under challenge in American courts.
·
eSports became an
industry. To the delight of people who would prefer to
spend their time gaming, online games became a recognized form of sports
competition, complete with news coverage and multimillion-dollar prize money.
·
Civil and social
movements changed thinking. There were pro-democracy protests
in the Middle East (Arab Spring), and social movements in the United States
(Occupy, Black Lives Matter, Blue Lives Matter, and MeToo, among others). MIT
explained, “…a successful movement can change how we think and talk about key
social issues.”
·
The Higgs Boson
particle was found. Any fan of the television
show, The Big Bang Theory, will know exactly how much this meant to
Sheldon Cooper. The television show’s popularity was also a phenomenon of the
last decade.
·
Carli Lloyd scored
the fastest hat trick in World Cup soccer. Carli Lloyd scored a hat trick
– three goals – in 13 minutes for the U.S. women’s national team during the
World Cup final against Japan in 2015. She also played on the team that won the
2019 Women’s World Cup.
·
Hurricanes,
earthquakes, and storms wrought destruction. Countries
around the world were pummeled by storms during the decade. Hurricanes and
tropical storms like Irene, Sandy, Harvey, Irma, Michael, Dorian, and Maria did
significant damage in the United States and its territories. One of the most memorable
was the Great Japanese earthquake and tsunami that preceded the Fukushima
Daiichi nuclear accident.
·
The Chicago Cubs broke
the curse. Advised by their manager to go out there
and, “Try not to suck,” the Cubs won the World Series for the first time since
1908.
·
Entertainment took a
turn toward streaming. Deadline Hollywood
reported, “It is impossible to find a corner of the industry that has not been
reshaped by streaming, from the pay TV ecosystem and movie exhibition to labor
negotiations and talent deals.”
The 2010s provided
disruptions and delights. Let’s hope the events of the coming decade will make
the world a better place.
Weekly Focus – Think About It
“It's the
action, not the fruit of the action, that's important. You have to do the right
thing. It may not be in your power, may not be in your time, that there'll be
any fruit. But, that doesn't mean you stop doing the right thing. You may never
know what results come from your action. But, if you do nothing, there will be
no result.”
--Mahatma Gandhi, Lawyer, politician, social
activist
Best regards,
Leif M.
Hagen
Leif M. Hagen, CLU, ChFC
LPL Financial Advisor
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, 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.wsj.com/articles/investors-bail-on-stock-market-rally-fleeing-funds-at-record-pace-11575801002 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/01-06-20_WSJ-Investors_Bail_on_Stock_Market_Rally_Fleeing_Funds_at_Record_Pace-Footnote_2.pdf)
https://www.barrons.com/articles/dow-jones-industrial-average-finds-reason-to-drop-after-u-s-air-strike-on-iran-51578105152?mod=hp_DAY_6 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/01-06-20_Barrons-The_Dow_was_Waiting_for_a_Reason_to_Drop_The_US_Air_Strike_Supplied_It-Footnote_9.pdf)
