"Peek of the Week"
January 14, 2019
The Markets
People
love rules of thumb
Sometimes,
mental shortcuts are helpful. Other times they are not. When it comes to
investing, seasonal shortcuts are not uncommon. In fact, January boasts two:
The January Effect explains why U.S. smaller company stocks tend to outperform
the market in January. The original theory held that tax-loss harvesting pushed
stock prices lower in December, making shares more attractive to investors in
January. An article published in International
Journal of Financial Research explained the effect could also owe something
to the optimism that accompanies a new year, as well as year-end cash windfalls.
In
his book, A Random Walk Down Wall Street,
Burton Malkiel described the January Effect this way, “…the effect is not
dependable in each year. In other words, the January ‘loose change’ costs too
much to pick up, and in some years it turns out to be a mirage.”
The January Barometer suggests the performance of stocks during the first
month of the year offers insight to the direction of stocks for the year as a
whole.
Last
week, the Standard & Poor’s 500 Index (S&P 500) was up 2.5 percent. If the
Index finishes this month higher, then the January Barometer suggests it should
finish the year in positive territory.
Of
course, you need look no further than 2018 to see the January Barometer is not completely
accurate. In January 2018, the S&P 500 gained 5.6 percent, and it finished
the year in negative territory.
According
to Fidelity, the theory is flawed
because, while stocks move higher for the year a significant percentage of the
time after gaining value in January, they also move higher for the year a
significant percentage of the time after losing value in January.
This
is why mental shortcuts are often poor investment guides.
There
is one rule of thumb investors may want to consider adopting: A well-allocated
and diversified portfolio that aligns with long-term financial aspirations to help
meet goals along with periodic reviews with their financial professional.
Data as of
1/11/19
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
2.5%
|
3.6%
|
-6.2%
|
10.5%
|
7.4%
|
11.6%
|
|
Dow Jones Global ex-U.S.
|
3.2
|
3.8
|
-15.7
|
5.9
|
-0.4
|
4.7
|
|
10-year Treasury Note (Yield Only)
|
2.7
|
NA
|
2.5
|
2.2
|
2.8
|
2.3
|
|
Gold (per ounce)
|
0.7
|
0.6
|
-2.6
|
5.4
|
0.7
|
4.5
|
|
Bloomberg Commodity Index
|
1.7
|
3.8
|
-9.8
|
1.9
|
-8.6
|
-3.5
|
|
DJ Equity All REIT Total Return
Index
|
4.5
|
4.1
|
4.5
|
6.6
|
9.0
|
14.8
|
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; 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.
Oh, What A Year! Every year brings unexpected events. Here are a few remarkable
stories you may have missed in 2018:
Abuzz in NYC
“…a
menacing horde of honeybees descended on a hot dog vendor’s umbrella, bringing
Times Square to a standstill and drawing swarms of gawking tourists. After a
brief flurry of excitement, the buzzing interlopers were apprehended by a
police officer armed with a vacuum cleaner-like device that sucked them up. The
bees were then whisked away to safety.”
--Reuters,
December 17, 2018
Mostly indivisible
“There's
a new behemoth in the ongoing search for ever-larger prime numbers – and it's
nearly 25 million digits long. A prime is a number that can be divided only by
two whole numbers: itself and 1… We would
write the number out for you, but it would fill up thousands of pages, give or
take…”
--NPR,
December 21, 2018
Hoop dreams
“Basketball
is apparently being embraced by North Korea as a fundamental part of its
ideology…‘Promoting basketball is not only a sports-related matter, but an
important project that upholds the objectives of the [Workers] Party,’ the
North Korean paper reportedly stated. ‘We must rush to elevate the sport to
global levels.’”
--NPR,
December 21, 2018
None for you
“A
California court ruled…in a case involving a Celebes crested macaque who took a
selfie using a nature photographer’s camera…the court rejected a lawsuit filed
on the monkey’s behalf by People for the Ethical Treatment of Animals, which
argued the primate was the legal owner of all photos he took. In a decision
that likely left the plaintiffs crestfallen, the court ruled that monkeys
cannot sue for copyright protection.”
--Reuters,
December 17, 2018
We
hope 2019 brings you good health, good humor, and great happiness.
Weekly Focus – Think About
It
“As
we navigate our lives, we normally allow ourselves to be guided by impressions
and feelings, and the confidence we have in our intuitive beliefs and
preferences is usually justified. But not always. We are often confident even
when we are wrong, and an objective observer is more likely to detect our
errors than we are.”
--Daniel
Kahneman, psychologist and author
Best regards,
Leif M. Hagen
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 Group 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 Group Coaching. Carson Group 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 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 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 that 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:
Burton Malkiel, ‘A Random Walk Down Wall
Street,’ W.W. Norton & Company, Page 271, January 1, 2019 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-14-19_BookExcerpt-A_Random_Walk_Down_Wall_Street-Footnote_2.pdf)
Daniel Kahneman, ‘Thinking, Fast and Slow,’
Farrar, Straus and Giroux, Page 4, April 2, 2013 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-14-19_BookExcerpt-Thinking_Fast_and_Slow-Footnote_10.pdf)
