The Markets
Back to school…back to higher interest rates?
After a solid July jobs report arrived on Friday –
215,000 new jobs were created and unemployment remained at 5.3 percent – analysts
were pretty confident there would be ample support for a Federal Reserve rate
increase (a.k.a. liftoff) in September. Bloomberg
reported the odds of a September liftoff shot from 38 percent to 52 percent just
last week.
The pending rate increase was not a surprise, but investors
were ruffled and U.S. stock markets moved lower. According to Barron’s, the Dow Jones Industrial Index
has lost value for seven days – its longest losing streak in four years.
However, nobody was reaching for a panic button:
“…The decline
in U.S. stocks has raised few alarms in part because it’s been gradual and
doesn’t seem tied to any fundamental flaws in the economy. The natural drift of
the market now is lower because, frankly, there are few obvious catalysts to
lift stocks higher. Large-company U.S. stocks fetch valuations well above their
historical averages and their earnings aren’t growing. Paying more for these
stocks ahead of a Fed rate increase equates to “fighting the Fed,” a prospect
investors look upon almost as favorably as sticking their fingers in an
electrical outlet.”
The Fed rate increase is expected to be slow and
gradual, but no one is certain what will happen after it begins. Russ
Koesterich, Chief Global Investment Strategist at BlackRock, expects,
“Short-term bonds will be most affected by higher rates, while longer-term bond
yields should inch up at a gentler pace. High-dividend stocks that have served
as “bond market proxies” are also likely to suffer, but overall, stocks’
reaction to liftoff should be relatively tempered.”
Data as of 8/7/15
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500 (Domestic Stocks)
|
-1.3%
|
0.9%
|
8.8%
|
14.0%
|
13.0%
|
5.4%
|
Dow Jones Global ex-U.S.
|
-0.8
|
1.6
|
-4.7
|
5.7
|
2.8
|
2.5
|
10-year Treasury Note (Yield Only)
|
2.2
|
NA
|
2.4
|
1.6
|
2.8
|
4.4
|
Gold (per ounce)
|
-0.5
|
-8.8
|
-16.7
|
-12.1
|
-1.9
|
9.6
|
Bloomberg Commodity Index
|
-1.4
|
-13.3
|
-29.2
|
-14.3
|
-7.7
|
-5.7
|
DJ Equity All REIT Total Return
Index
|
0.0
|
-0.9
|
9.3
|
10.2
|
12.5
|
7.7
|
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.
are you overwhelmed at work? Last year, the most popular chapter in Deloitte University Press’
Global Human Capital Trends 2014
report was titled, “the overwhelmed employee.” It’s not all that hard to
understand when you consider just these facts from the 2015 report:
·
100 billion emails
are exchanged every day.
·
About 14 percent
of those emails are vitally important.
·
One-fourth of the
average workday is spent reading and answering email.
·
We check mobile
phones 150 plus times each day, on average, for work/personal information.
In addition to technology and
round-the-clock work demands, the complexity of workplace practices, processes,
and jobs contribute to employee inundation. According to Deloitte, approximately three-fourths of survey participants said
their workplaces were complex or highly complex.
Now, a new wind is blowing.
It’s simplification. The Global Human Capital
Trends 2015 report found 10 percent of companies surveyed have programs in
place to simplify work practices and another 44 percent plan to put these
programs in place.
It’s a trend that could have
an effect on companies that aren’t taking action. The bottom line, according to
the report:
“Technology,
globalization, and compliance needs continuously add complexity to work. Left
unaddressed, this can lead to an organizational environment that damages
employee engagement, lowers quality, and reduces innovation and customer
service.”
Companies that are reducing
complexity and focusing on what really matters may gain a competitive edge,
said Deloitte.
Weekly
Focus – Think About It
“In the 20th century, the United States endured two
world wars and other traumatic and expensive military conflicts; the Depression;
a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and
the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”
--Warren Buffett, legendary investor
Best regards,
Leif M. Hagen
Leif
M. Hagen, CLU, ChFC
LP Financial Advisor
Securities
offered through LPL Financial Inc.,
Member
FINRA/SIPC.
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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.
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Sources:
http://online.barrons.com/articles/dow-suffers-longest-losing-streak-in-four-years-1439009810?mod=BOL_hp_we_columns (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/08-10-15_Barrons-Dow_Suffers_Longest_Losing_Streak_in_Four_Years-Footnote_3.pdf)
https://www.blackrock.com/investing/insights/investment-outlook?cid=blog:thelist:russkoutlookpost (Click on “5 Things to Know,” then “2. Fed Will Lift
Off, World Will Not End”)
http://d2mtr37y39tpbu.cloudfront.net/wp-content/uploads/2015/02/DUP_GlobalHumanCapitalTrends2015.pdf
