“Peek of the Week”
Market Commentary
February 18, 2020
The Markets
Many stock markets around the
world moved higher last week.
Investors’ optimism in the face
of economic headwinds has confounded some in the financial services industry. Laurence
Fletcher and Jennifer Ablan of Financial Times cited several money
managers who believe investors have become complacent. One theory is investors’
buy-the-dip mentality has become so firmly ingrained that any price drop is
seen as a buying opportunity, regardless of share price valuation.
Another theory is investors
remain confident in the face of declining economic growth expectations because
they expect central bankers to save the day:
“Key stock markets are hovering
close to record highs even while the death count from the China-centered virus
rises and travel in, out, and around the country remains heavily restricted,
hurting the outlook for domestic and international companies. Regardless,
stumbles in stocks are quickly reversed. To some traders, this is proof that
investors believe major central banks will pump more stimulus into the
financial system.”
Ben Levisohn of Barron’s doesn’t
think investors in U.S. stocks are complacent. He wrote:
“Yes, [investors have] decided to
stay invested in U.S. stocks, but compare it with the other options. Emerging
market stocks near the epicenter of the outbreak? Treasury notes with yields of
just 1.59 percent? Cash? But, they haven’t sat idly by, either. They’ve dumped
the stocks most exposed to coronavirus and to a slowing economy – things like
energy, cruise lines, airlines, steel.”
Treasury bond markets are
telling a less optimistic story than stock markets. The U.S. treasury bond
yield curve has flattened in recent weeks. On Friday, 3-month treasuries were
yielding 1.58 percent while 10-year treasuries yielded 1.59 percent. When there
is little difference between yields for short- and long-term maturities, the
yield curve is considered to be flat.
Historically, the slope of the
yield curve – a line that shows yields for Treasuries of different maturities –
is believed to provide insight to what may be ahead for economic growth. Normal
yield curves may indicate expansion ahead, while inverted yield curves suggest
recession may be looming. Flat yield curves suggest a transition is underway.
Data as of 2/14/20
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
1.6%
|
4.6%
|
23.1%
|
13.1%
|
10.0%
|
11.9%
|
|
Dow Jones Global ex-U.S.
|
0.4
|
-0.4
|
10.10
|
5.4
|
2.5
|
3.4
|
|
10-year Treasury Note (Yield Only)
|
1.6
|
NA
|
2.7
|
2.5
|
2.2
|
3.7
|
|
Gold (per ounce)
|
0.6
|
3.8
|
20.6
|
8.7
|
5.2
|
3.7
|
|
Bloomberg Commodity Index
|
0.8
|
-6.8
|
-5.7
|
-5.3
|
-6.2
|
-5.6
|
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’s your favorite
remedy for a Hangover? Consuming too much alcohol comes with
an unwelcome side effect: the hangover. Symptoms
of a hangover typically include dehydration, fatigue, vertigo, headache,
nausea, and muscle aches. If
you’ve ever had one you may understand the growing market for hangover treatments.
By one estimate, Americans experience 2.6 billion
hangovers each year. That may be why market research analysts think hangover
remedies have the potential to become a billion-dollar industry. The
Washington Post reported the number of recovery (and ‘precovery’) treatments
has ballooned during the past three years. So far, the hangover remedy industry
has:
·
Offered treatments that include water-soluble tablets,
capsules, beverages, and patches.
·
Attracted $10 million of Silicon Valley venture capital.
·
Birthed start-ups that generate strong sales during the
first few months of operations.
The hangover market is small potatoes when compared to
the market for alcoholic beverages ($1.4 trillion). However, the market for
non-alcoholic cocktails is growing, too. In New York City, booze-free bars charge
$13 a pop for dry cocktails.
Here’s a question: Are alcohol-free drinks a precovery hangover
solution or a beverage?
Weekly Focus – Think About It
“A hangover is the wrath of
grapes.”
--Dorothy Parker, American poet
Best regards,
Leif
M. Hagen
Leif M. Hagen, CLU ChFC
LPL Financial Advisor
LPL Financial Advisor
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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://markets.ft.com/data/world (Click on ‘Global indices’ at the bottom left of the
map and choose ‘5 day’) (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/02-18-20_FinancialTimes-Global_World_Markets_Indices-Footnote_1.pdf)
https://www.ft.com/content/8732e814-4e82-11ea-95a0-43d18ec715f5 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/02-18-20_FinancialTimes-Investor_Complacency_Sets_in_While_Coronavirus_Spreads-Footnote_2.pdf)
https://www.barrons.com/articles/dow-jones-industrial-average-gained-1-this-week-as-stocks-ignore-the-coronavirus-51581726118?mod=hp_DAY_1 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/02-18-20_Barrons-The_Dow_Jones_Industrial_Average_Gained_1_Percent_this_Week-Let_It_Ride-Footnote_3.pdf)
