PEEK OF THE WEEK
December 8th, 2016
The Markets
Anyone looking at U.S. stock market performance last
week might assume it was a pretty quiet week. They would be wrong. It was a very
bouncy week. U.S. stock markets moved lower on Monday, rebounded on Tuesday,
and then appeared to suffer a one-two punch mid-week that knocked indices lower.
On Wednesday, the benchmark U.S. oil price sank below
$40 a barrel as supply continued to exceed demand, according to The Wall Street Journal (WSJ). Analysts
had expected stockpiles of crude oil, gasoline, and other fuels to decline.
Instead, stores increased to more than 1.3 billion barrels. The glut of fuel
drove energy stock values down and energy stocks led the broader market lower,
according to WSJ.
Performance did not improve on Thursday. In part, this
was because the European Central Bank (ECB) underwhelmed markets when it
delivered economic measures that were less stimulative than many had expected. The
Financial Times reported the ECB
reduced rates and pledged to extend quantitative easing for six additional
months, but it did not increase the amount of its bond purchases, which
disappointed investors. Stock markets in Europe and the United States lost
value on the news.
On Friday, a strong jobs report restored investors’
enthusiasm and markets regained losses suffered earlier in the week, according
to ABC News. The Department of Labor
announced 211,000 jobs were added in November, which was more than analysts had
expected. Strong employment numbers made the possibility of a Federal Reserve
rate hike seem more certain and investors welcomed certainty. The ECB jumped
into the good-news pool on Friday, too, announcing it would expand stimulus
measures, if necessary.
The Standard & Poor’s 500, Dow Jones Industrial,
and NASDAQ indices were all up for the week.
Data as of 12/4/15
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard &
Poor's 500 (Domestic Stocks)
|
0.1%
|
1.6%
|
1.0%
|
14.1%
|
11.3%
|
5.2%
|
Dow Jones Global
ex-U.S.
|
-0.7
|
-5.4
|
-7.7
|
1.4
|
-0.2
|
1.0
|
10-year Treasury
Note (Yield Only)
|
2.3
|
NA
|
2.3
|
1.6
|
2.9
|
4.6
|
Gold (per ounce)
|
2.1
|
-10.0
|
-10.7
|
-14.0
|
-5.3
|
7.9
|
Bloomberg Commodity Index
|
0.7
|
-21.7
|
-27.2
|
-16.9
|
-11.9
|
-7.3
|
DJ Equity All REIT Total Return Index
|
-1.2
|
1.0
|
2.2
|
11.1
|
11.7
|
7.1
|
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.
it’s that time of the year. No,
not the holidays. It’s the time when investors begin to consider pundits’ forecasts
for the coming year. Here are a few of those forecasts:
“Flat is the new up,” was the
catch phrase for Goldman Sachs’ analysts last August, and their outlook doesn’t
appear to have changed for the United States. In Outlook 2016, they predicted U.S. stocks will have limited upside next
year and expressed concern that positive economic news may bring additional Fed
tightening. Goldman expects global growth to stabilize during 2016 as emerging
markets rebound, and Europe and Japan may experience improvement.
Jeremy Grantham of GMO, who
is known for gloomy outlooks, is not concerned about the Federal Reserve
raising rates, according to Financial
Times (FT). FT quoted Grantham as
saying, “We might have a wobbly few weeks…but I’m sure the Fed will stroke us
like you wouldn’t believe and the markets will settle down, and most probably
go to a new high.” Grantham expects the high to be followed by a low. He has
been predicting global markets will experience a major decline in 2016 for a
couple years, and he anticipates the downturn could be accompanied by global
bankruptcies.
PWC’s Trendsetter Barometer offered a business outlook after surveying corporate
executives. After the third quarter of 2015, it found, “U.S. economic
fundamentals remain strong, but markets and executives like predictability, and
that’s not what we’ve been getting lately… Trendsetter growth forecasts are
down, so are plans for [capital expenditure] spending, hiring, and more. It
doesn’t help that we’ve entered a contentious 2016 election season...”
The Economist
had this advice for investors who are reviewing economic forecasts, “Economic forecasting
is an art, not a science. Of course, we have to make some guess. The average
citizen would be well advised, however, to treat all forecasts with a bucket
(not just a pinch) of salt.”
Weekly Focus –
Think About It
“Weather forecast for tonight: dark.”
--George Carlin, American comedian
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://www.wsj.com/articles/oil-prices-fall-on-fears-of-increased-u-s-stockpiles-1449050223 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-07-15_WSJ-US_Oil_Prices_Dip_Below_40_Dollars_on_Growing_Stockpiles-Footnote_2.pdf)
http://www.wsj.com/articles/global-stocks-little-changed-ahead-of-ecb-meeting-u-s-jobs-report-1449047610 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-07-15_WSJ-US_Stocks_Decline_Along_with_Oil_Prices-Footnote_3.pdf)
http://www.ft.com/cms/s/0/b7f719ec-9965-11e5-9228-87e603d47bdc.html#ixzz3tVSPJthW (Click on Markets tab, then “Euro jumps as ECB underwhelms markets”)
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-07-15_FinancialTimes-Eruo_Jumps_as_ECB_Underwhelms_Markets-Footnote_4.pdf)
http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html (Click on U.S.
& Intl Recaps, "Countdown time," then scroll down to “Markets: The liftoff effect,
what if any?”)
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-07-15_Barrons-Markets_At_A_Glance-Footnote_6.pdf)
http://www.ft.com/cms/s/0/82737cca-39f2-11e5-bbd1-b37bc06f590c.html#ixzz3tSnjouFV (Click on Markets tab, then Capital Markets) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-07-15_FinancialTimes-GMO_Founder_Grantham_Says_Markets_Ripe_for_Major_Decline_in_2016-Footnote_9.pdf)
http://blogs.wsj.com/moneybeat/2014/05/02/jeremy-grantham-on-bubbles-i-am-sure-it-will-end-badly/ (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-07-15_WSJ-Jeremy_Grantham_on_Bubbles-I_Am_Sure_It_Will_End_Badly-Footnote_10.pdf)
http://www.pwc.com/us/en/private-company-services/publications/assets/trendsetter-q3-2015/pwc-trendsetter-barometer-q3-2015.pdf (Introduction
page) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-07-15_PWC-3rd_Qtr_Trendsetter_Barometer-Footnote_11.pdf)
http://www.economist.com/blogs/buttonwood/2015/11/economic-forecasting-and-public-spending (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-07-15_TheEconomist-The_Perils_of_Planning_on_the_Basis_of_Economic_Forecasts-Footnote_12.pdf)
