Hagen Financial Network, Inc.

Thursday, September 03, 2015

Markets bumpy ride, China slowing growth, shifting currency valuations and more in this week's PEEK of the WEEK

Peek of the Week

Sept. 3, 2015

The Markets

U.S. stock markets finished last week higher than they started it, but the five-day ride was awfully bumpy.

Concerns about China’s slowing growth, shifting currency valuations, and falling stock markets, coupled with uncertainty about the Federal Reserve’s next monetary policy move, contributed to malaise in world markets early last week.

After falling by about 6 percent the previous week, U.S. stocks spiraled even lower early last week. They flirted with correction status (a correction is a 10 percent drop from previous highs) before moving higher.

By midweek, markets were on the rebound, bolstered in part by the comments of New York Fed President William Dudley who indicated a September rate hike might not be all that compelling. Strong U.S. economic data also soothed some investors. Barron’s reported:

“The economic data, however, have been good enough to suggest that the market is too pessimistic. There was that strong second-quarter gross-domestic-product reading, which even included signs of stronger capital spending, while good housing data suggest that third-quarter GDP could be better than many observers expect.”

Market whiplash left investors feeling pretty shaky, as did late-week comments from Fed Vice Chairman Stanley Fischer who indicated it was too soon to know what the Fed would decide about interest rates in its September meeting. He indicated the decision would depend on economic data that is still being collected.

While the market’s end of week bounce was welcome, The Wall Street Journal reported traders and investors appear to be ready for additional volatility.

Whether markets are volatile or calm this week, it’s important to remember that it’s impossible for any of us to control what happens in Washington, on Wall Street, or on Main Street. We can, however, control how we prepare for and respond to market volatility. As you know, we believe thoughtful goal identification, risk tolerance education, and a disciplined approach can help investors reach their long-term financial goals.

We understand that market volatility is uncomfortable, but it is not unusual or unexpected. If you have any questions or would like to discuss recent events, please contact your financial advisor.

Data as of 8/28/15	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	0.9%	-3.4%	-0.4%	12.2%	13.7%	5.1%
Dow Jones Global ex-U.S.	0.0	-4.9	-13.2	3.3	2.5	1.9
10-year Treasury Note (Yield Only)	2.2	NA	2.3	1.6	2.6	4.2
Gold (per ounce)	-1.9	-5.4	-12.2	-12.0	-1.9	10.2
Bloomberg Commodity Index	1.8	-14.4	-29.3	-14.8	-7.5	-6.2
DJ Equity All REIT Total Return Index	-2.9	-4.7	2.1	8.5	12.8	7.0

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; the DJ Equity All REIT Total Return 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, Barron’s, 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.

how bad is traffic congestion in the united states? It’s so bad, the average American spends the equivalent of about five vacation days sitting in traffic every year – and that’s just the tip of the iceberg.

As it turns outs, the Great Recession had a silver lining – less traffic and less congested roads. Today, according to researchers at the Texas A&M Transportation Institute, employment is up and so is the number of commuters on the road:

“According to the 2015 Urban Mobility Scorecard, travel delays due to traffic congestion caused drivers to waste more than 3 billion gallons of fuel and kept travelers stuck in their cars for nearly 7 billion extra hours – 42 hours per rush-hour commuter. The total nationwide price tag: $160 billion, or $960 per commuter.”

Of course, in some cities, people spend a lot more time inching along freeways. In Washington, D.C., drivers spend about 82 hours each year commuting; in Los Angeles, 80 hours; in San Francisco, 78 hours; and in New York, 74 hours. Across the nation, by 2020, commuter delays are expected to increase from 42 hours to 47 hours on average, raising the cost of congestion from $160 billion to $192 billion.

What’s to be done? Cities like Singapore, London, San Diego, Stockholm, and Milan have adopted “congestion pricing.” In San Diego, express toll-lanes allow drivers to bypass gridlocked free lanes, if they are willing to pay a fee. Other cities have cordon pricing. Drivers are charged a fee each time they enter a congested area, such as a city center. The state of Oregon is charging per mile driven (a system the state may use to replace fuel taxes in the future) and may begin to charge a higher rate for miles traveled during periods of congestion on heavily used roads.

Weekly Focus – Think About It

“If opportunity doesn't knock, build a door.”

--Milton Berle, Comedian

Best regards,

Leif M. Hagen

Leif M. Hagen, CLU, ChFC

LP Financial Advisor

Securities offered through LPL Financial Inc.,

Member FINRA/SIPC.

www.FINRA.com

www.SIPC.com

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* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.

* 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.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees,

expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* 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.

* 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.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

* To unsubscribe from the “Peek of the Week”, please reply to this email with “Unsubscribe” in the subject line, or write us at: Hagen Financial Network, Inc. 4640 Nicols Road, Suite 203; Eagan, MN 55122.

Sources:

http://www.barrons.com/articles/dow-ends-higher-after-global-tumult-1440826661?mod=BOL_hp_we_columns (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/08-31-15_Barrons-Dow_Ends_Higher_After_Global_Tumult-Footnote_1.pdf)

http://www.marketwatch.com/story/case-for-september-rate-hike-was-pretty-strong-before-china-devaluation-fischer-says-2015-08-28

http://www.wsj.com/articles/global-stocks-stabilize-after-u-s-data-commodities-rally-1440748637 (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/08-31-15_WSJ-US_Stocks_Cap_Volatile_Period_with_Weekly_Gains-Footnote_3.pdf)

http://www.barrons.com/articles/two-bulls-keep-the-faith-on-u-s-stocks-1440826633?mod=BOL_hp_we_columns (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/08-31-15_Barrons-Two_Bulls_Keep_the_Faith_on_US_Stocks-Footnote_4.pdf)

https://www.transportation.gov/sites/dot.gov/files/docs/Draft_Beyond_Traffic_Framework.pdf

http://mobility.tamu.edu/ums/media-information/press-release/

http://thisbigcity.net/five-cities-with-congestion-pricing/

http://ops.fhwa.dot.gov/publications/congestionpricing/sec2.htm

http://www.brainyquote.com/quotes/quotes/m/miltonberl105306.html#MwdKlmheRGbltkyK.99--

Tuesday, August 25, 2015

A drop in the DOW, China's slowdown, emerging markets and more in this week's PEEK of the WEEK

Peek of the Week

August 25, 2015

The Markets

Correction!

The Dow Jones Industrial Average lost about 6 percent last week. That puts the benchmark index about 10 percent below its record high on May 19, 2015, according to Barron’s.

A drop of that magnitude from a new high may be a correction – a brief but jarring drop in value that often causes investors to reassess the state of the market and the health of the companies they hold. If investors judge markets and holdings to be sound, a correction may represent a buying opportunity. Of course, there is a chance markets could fall further. A drop of 20 percent or more is considered a bear market.

The Standard & Poor’s 500 Index lost about the same amount as the Dow last week and is down almost 8 percent from its May high. Technically, it’s not yet in correction territory. A dip greater than 5 percent and less than 10 percent is a pullback.

Many factors contributed to U.S. stock markets’ performance last week. Concerns about global recovery were top of mind for many investors. China’s slowdown may significantly reduce demand for commodities, and emerging markets that are dependent on commodity exports are struggling. CNN Money reported:

“China's economic slowdown and currency devaluation have investors worried that things could get worse as the year goes on. Developing countries like Brazil and Russia are struggling to revive their economies as their currencies depreciate dramatically against the dollar. Brazil's currency value has declined over 20 percent and Russia's over 40 percent, hurting imports and everyday citizens. It's also a huge worry for America's biggest companies. About 44 percent of the revenues from S&P 500 companies come from outside the United States.”

Currency depreciation (not to be confused with devaluation, which is a government’s deliberate downward adjustment in currency value) is market-driven and sometimes causes investors to pull assets out of a country, which can put more pressure on the currency.

Uncertainty about the timing of a rate hike in America didn’t help matters. CNBC reported, after the minutes of the July Federal Open Market Committee meeting were released last week and indicated “almost all members” had some concerns about the strength of U.S. economic growth, the CME FedWatch barometer put the likelihood of a September increase at 24 percent – a 45 percent drop from the prior day.

Data as of 8/21/15	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	-5.8%	-4.3%	-1.1%	11.7%	13.1%	4.9%
Dow Jones Global ex-U.S.	-5.0	-4.9	-13.1	2.8	2.5	1.7
10-year Treasury Note (Yield Only)	2.1	NA	2.4	1.8	2.6	4.2
Gold (per ounce)	3.4	-3.6	-9.3	-11.0	-1.2	10.2
Bloomberg Commodity Index	-2.8	-15.8	-30.0	-15.6	-7.7	-6.1
DJ Equity All REIT Total Return Index	-2.4	-1.8	4.3	9.8	13.7	7.3

Sources: Yahoo! Finance, Barron’s, 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.

From abstract to reality: the potential effects of rising rates.

When the economic data align, and the Federal Reserve pulls the trigger on tighter monetary policy, rising interest rates may affect everything from mortgage rates to bond yields to economic growth. Here are a few of the possible consequences:

· Higher demand for short-term bonds. When interest rates rise, bond values fall, and vice versa. However, changes in bond values will be influenced by the speed and magnitude of the rate change. A sharp increase over a short period would have a greater effect than a gradual rise over a longer period. To date, the Fed has indicated the fed funds rate will rise gradually. Experts cited by The Wall Street Journal suggest shorter-term bonds and cash will be more attractive than longer-term bonds for a period of time.

· Less attractive loan terms and credit card incentives. By raising the fed funds rate, the Fed will increase borrowing costs. That’s likely to affect mortgage rates as well as automobile and other consumer loan rates. The Journal cautioned homebuyers to be wary of adjustable-rate mortgages and indicated zero percent introductory offers on credit cards may disappear.

· Slow improvement in savings account returns. Over the longer term, rising rates may prove to be a boon for savers, but there is likely to be little immediate change in the yields offered on savings accounts. That’s because banks set these rates. In general, banks raise rates to attract deposits and few banks need to do that right now, according to an expert cited by The Wall Street Journal.

While it seems counterintuitive, tightening monetary policy will not affect interest rates equally across all markets.