“Peek
of the Week”
Market Commentary
Market Commentary
September 3, 2019
The Markets
What, me worry?
About this time last year, Time Magazine reported on anxiety in
America. Almost 40 percent of Americans reported being more anxious than they were
the previous year.
The performance of stock and
bond markets this summer may have pushed those numbers higher.
Last week finally brought
some relief. It was the best week for major U.S. stock indices since June. The
Standard & Poor’s 500 Index, Dow Jones Industrial Average, and Nasdaq
Composite all gained between 2 and 3 percent, reported Ben Levisohn of Barron’s.
How can investors cope if
volatility continues?
Barron’s
Randall Forsyth offered a recommendation, “When the stock market is this crazy,
you should just invest lazy.” It’s important to note that Forsyth’s definition
of ‘managing lazy’ is building a diversified portfolio aimed at achieving your
financial goals and leaving it alone.
Marketplace’s
Andie Corban and Kai Ryssdal offered a pretty good argument for lazy investing,
too. In the audio report, Ryssdal discussed trading algorithms with Joe Gits of
Social Market Analytics:
“Gits:
So these [algorithms] are reading the president’s tweet using natural language
processing [NLP], and our current president’s tweets are pretty easy to read
with NLP, and they are either going long or going short.
Ryssdal:
I’m going to ask you to make a value judgment here, then. Entirely apart from
making money, are these algorithms – and the outsized effect that they have on
movement of the markets – are they a good thing or a bad thing?
Gits:
I think they’re a bad thing in general, because I think the volatility causes a
lot of panic by buying and selling and I think the average investor gets hurt.”
Staying calm in the face of
volatility isn’t easy, but it’s an important skill for investors to hone. If it
helps, remember volatility can be computer-driven.
Data as of
8/30/19
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard &
Poor's 500 (Domestic Stocks)
|
2.8%
|
16.7%
|
0.9%
|
10.4%
|
7.9%
|
11.1%
|
|
Dow Jones Global
ex-U.S.
|
1.0
|
4.7
|
-6.7
|
3.1
|
-0.8
|
2.5
|
|
10-year Treasury
Note (Yield Only)
|
1.5
|
NA
|
2.9
|
1.6
|
2.4
|
3.4
|
|
Gold (per ounce)
|
1.6
|
19.3
|
27.7
|
5.1
|
3.5
|
4.8
|
|
Bloomberg Commodity Index
|
1.2
|
0.4
|
-7.9
|
-2.7
|
-9.3
|
-4.8
|
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.
Imagine Money with
an expiration date. At the turn of
the 19th century, some economists thought negative interest rates
made sense, according to The Economist.
In 1916, Silvio Gesell
published The Natural Economic Order, a pamphlet promoting the idea of
negative interest rates. A self-taught economist, Gesell lost faith in money
after living through a financial crash in Argentina during the 1890s.
Planet Money reported:
“The
problem, Gesell believed, was that money served two roles that often came into
conflict: It was a way for people to store wealth, and it was the thing
everybody needed to conduct business. The fact that money could store wealth
meant its holders had a reason to cling to it, especially in crises like the
one he saw in Argentina, when opportunities to safely put that money elsewhere
looked grim. It was a typical story. When people got scared, they hoarded cash
and brought business to a standstill.”
Gesell suggested a solution: negative
interest rates on money. If money continuously lost value, people would not hoard
it. They would, in fact, have an incentive to spend it.
How do you make money lose value?
Gesell proposed a tax. Every year, money would expire
and lose all value unless the money holder purchased a stamp. The stamp wouldn’t
be free, reported Financial Times. There
would be a fee for the stamp.
For example, if a person held a $100 bill and paid
a $1 fee after holding it for a year, the after-stamp value of the money would
be $99. After five years of paying fees, $100 would be worth $95.
Gesell believed people would, in effect, earn
negative interest rates if they held onto money. As a result, they would be
eager to spend, and that would keep the economy healthy, and possibly help
prevent future depressions and improve prosperity.
It’s a thought-provoking theory that earned Gesell
a number of nicknames, some flattering and some not.
Weekly Focus – Think About It
“The ultimate purpose of economics, of
course, is to understand and promote the enhancement of well-being.”
--Ben Bernanke, Former Chair U.S.
Federal Reserve
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
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 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/stocks-rally-3-ending-a-bad-month-on-a-good-note-51567212639?mod=hp_DAY_3 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/09-03-19_Barrons-Stocks_Rally_3_Percent_Ending_a_Bad_Month_on_a_Good_Note-Footnote_2.pdf)
https://www.barrons.com/articles/when-the-stock-market-is-this-crazy-you-should-just-invest-lazy-51567213413?mod=hp_DAY_1 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/09-03-19_Barrons-When_the_Stock_Market_is_This_Crazy_You_Should_Just_Invest_Lazy-Footnote_3.pdf)
https://www.npr.org/sections/money/2019/08/27/754323652/the-strange-unduly-neglected-prophet (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/09-03-19_NPR-Planet_Money-The_Strange_Unduly_Neglected_Prophet-Footnote_5.pdf)
https://www.economist.com/finance-and-economics/2018/02/03/why-sub-zero-interest-rates-are-neither-unfair-nor-unnatural (or go
to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/09-03-19_TheEconomist-Why_Sub-Zero_Interest_Rates_are_Neither_Unfair_Nor_Unnatural-Footnote_6.pdf)
http://ftalphaville.ft.com/2015/02/02/2103032/negative-rates-and-gesell-taxes-how-low-are-we-talking-here/ (or go
to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/09-03-19_FinancialTimes-Negative_Rates_and_Gesell_Taxes-How_Low_are_We_Talking_Here-Footnote_7.pdf)
