“Peek of the Week”
Market Commentary
April 29, 2019
The Markets
It wasn’t an ‘Avengers End
Game’ spoiler, but there was big news last week.
Economic growth in
the United States was strong during the first quarter. The Bureau Of Economic Analysis (BEA) announced gross domestic product
(GDP), which is the value of all goods and services produced in the United States,
increased by 3.2 percent.
The estimate came
as a surprise. It was well above the consensus forecast of 2.3 percent,
according to Randall Forsyth of Barron’s.
In addition, as The Economist pointed
out,
“This year America’s economy did not get the freshest of starts. A
government shutdown, a wobbly stock market and concerns that the Federal
Reserve would tighten monetary policy too quickly made for a dim outlook for
2019. With the effects of fiscal stimulus fading, and momentum in the global
economy ebbing, most expected America’s economic growth to decelerate.”
Both Barron’s and The Economist cautioned investors to look under the hood, though.
The top contributors to accelerating growth were imports and exports, which
could be volatile. In addition, consumer spending, which usually accounts for
about of two-thirds of GDP growth, rose far more slowly than it did in the
previous quarter.
Investors were
appreciative of quarter-to-quarter GDP growth. They also were encouraged by
first quarter earnings reports. Earnings reflect the health and profitability
of public companies. With 46 percent of Standard & Poor’s 500 Index companies
reporting, FactSet wrote, “In
aggregate, companies are reporting earnings that are 5.3 percent above the
estimates, which is also above the five-year average.”
The S&P 500
and Nasdaq Composite Indices ended the week at record highs, while the Dow
Jones Industrial Average finished the week lower.
Data as of
4/26/19
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
1.2%
|
17.3%
|
8.5%
|
12.0%
|
9.5%
|
13.1%
|
|
Dow Jones Global ex-U.S.
|
-0.6
|
11.5
|
-5.9
|
5.2
|
0.8
|
5.7
|
|
10-year Treasury Note (Yield Only)
|
2.5
|
NA
|
3.0
|
1.9
|
2.7
|
2.9
|
|
Gold (per ounce)
|
0.7
|
0.2
|
-2.8
|
1.1
|
-0.2
|
3.5
|
|
Bloomberg
Commodity Index
|
-1.2
|
5.3
|
-9.7
|
-1.2
|
-10.1
|
-2.9
|
|
DJ
Equity All REIT Total Return Index
|
1.5
|
17.0
|
20.9
|
8.0
|
9.4
|
16.2
|
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, 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.
why do
countries stockpile goods? Some
countries stockpile goods they have deemed essential for human survival. For
instance, Switzerland has been stockpiling coffee, sugar, rice, edible oils,
and animal feed since World War II. Earlier this month, the country changed its
mind about coffee. The Swiss decided to stop maintaining an emergency supply of
java because it is not essential to human survival. Reuters reported that opposition is brewing.
The Canadian province of Quebec has a strategic reserve of maple syrup.
The stockpile has little to do with human survival, though. Real maple syrup is
a valuable commodity. Ounce for ounce, it is worth more than oil. National Public Radio (NPR) reported, “…the
global strategic reserve is actually a way to guarantee that high, high price
for maple syrup by removing - totally removing the natural boom-and-bust cycle
that would otherwise happen for an agricultural commodity.”
China has been stockpiling grain. Reuters
reported the United States Department of
Agriculture (USDA) expects 65 percent of the world’s corn and 50 percent of
the world’s wheat will be in China this year. In 2020, the government will
require all gasoline supplies to be blended with ethanol, which is renewable
fuel made from corn.
In the United States, we have been stockpiling cheese. In part, that’s
due to an excess of milk production. We use extra milk to make cheese, and
Americans eat a lot of cheese - about 37 pounds per capita in 2017, according
to NPR. Regardless, our cheese
surplus has grown to 1.4 billion pounds or 900,000 cubic centimeters. That’s
enough cheese to wrap around the U.S. Capital. The abundance of cheese is
driving prices lower.
Weekly Focus – Think About
It
“You know, farming looks
mighty easy when your plow is a pencil, and you’re a thousand miles from the
corn field.”
--Dwight D. Eisenhower, 34th
President of the United States
Best regards,
Leif M. Hagen
Leif M. Hagen, CLU, ChFC
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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 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.
*
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.
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Asset allocation does not ensure a profit or protect against a loss.
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