Peek of
the Week
Reading economic portents can be tricky.
For example, do signs that
economic growth is slowing – like last week’s employment report, which was
anemic relative to consensus forecasts, and first quarter’s gross domestic
product (GDP) growth – mean the economy is headed for trouble? Or, does it mean
the economy is going to continue to grow slowly?
It all depends on whom you
ask.
Some see current lackluster
economic data as a harbinger of trouble. Last week, Barron’s cited an expert who was concerned about employment data.
“…It could be a sign of trouble...Specifically, falling profit margins will put
pressure to trim costs and head counts later this year and into 2017, which
would slow consumer-spending growth.”
Others believe the United
States is destined to experience a persistent period of slow growth. In 2013, Barron’s suggested the enviable pace of
growth in the United States since World War II was likely to decline, along
with the size of its working-age population and gains in worker productivity. The
new era:
“…could
have broad repercussions that will affect not only the pugilists in Washington
but businesses and investors. Weaker growth will make it harder for companies
to improve earnings, fatten dividends, or garner better stock returns. It also
threatens to fan social inequality and class tensions and limit the ability of
government to fund various entitlement programs like Medicare and Social
Security. Tax revenues also are likely to fall short of projected levels.”
Of course, a lot depends on
how you gauge growth. A 2009 discussion in a Harvard Business School blog asked whether slower growth, as
measured by current indicators, was meaningful since, as this commentary
mentioned last week, gross domestic product (GDP) is a flawed indicator.
“Further, in an age of concern about the environment, questions are raised
about whether certain forms of growth – let alone incorrect measures – serve a
very good purpose.”
Investors expressed their
opinions last week. They weren’t thrilled by mixed economic data or the
possibility of slower growth. Reuters
suggested markets’ downward shift indicated a reduced appetite for risk.
Data as of 5/6/16
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard &
Poor's 500 (Domestic Stocks)
|
-0.4%
|
0.7%
|
-1.5%
|
8.3%
|
9.0%
|
4.5%
|
Dow Jones Global
ex-U.S.
|
-3.7
|
-2.1
|
-14.6
|
-2.9
|
-2.3
|
-1.2
|
10-year Treasury
Note (Yield Only)
|
1.8
|
NA
|
2.3
|
1.8
|
3.2
|
5.1
|
Gold (per ounce)
|
0.3
|
21.4
|
7.9
|
-3.7
|
-2.8
|
6.7
|
Bloomberg Commodity Index
|
-2.5
|
6.2
|
-20.3
|
-14.4
|
-12.2
|
-7.3
|
DJ Equity All REIT Total Return Index
|
4.3
|
8.6
|
15.0
|
8.3
|
11.5
|
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.
it probably won’t
surprise you to learn russia was on top. In countries around the world, crony capitalism has thrived during the
past two decades. The net worth of wealthy business folk, who worked closely
with their governments, was almost $2 trillion in 2014, an increase of about
385 percent from 2004. That is about one-third of the total wealth of
billionaires around the world.
The National
Review defined crony capitalism as “…an insidious system in which
businesses’ success is based on a close relationship with government and,
specifically, with the people in power who dispense favors, subsidies,
bailouts, and other forms of special treatment.”
The Economist offered some specific examples. “As commodity and
property prices soared, so did the value of permits to dig mines in China or
build offices in São Paulo. Telecoms spectrum doled out by Indian officials
created instant billionaires. Implicit state guarantees let casino banking
thrive on Wall Street and beyond.”
In an effort to measure the influence of crony
capitalism on wealth, The Economist
developed an index. The publication took Forbes’
annual lists of the world’s billionaires, designated each billionaire as crony
or not-crony (as determined by the industry in which he or she had accumulated
wealth), sorted them by country, and then calculated wealth as a percent of
their country’s gross domestic product (GDP).
Russia, Malaysia, Philippines, Singapore, and Ukraine
topped the 22-country index in 2016. Germany, Poland, South Korea, Japan, and
France were at the bottom. The United States was 15th on the list.
U.S. billionaires’ wealth is equivalent to about 13 percent of GDP, but wealth
earned through crony capitalism accounts for just 2 percent of that amount.
Weekly Focus –
Think About It
“The
price of success is hard work, dedication to the job at hand, and the
determination that whether we win or lose, we have applied the best of
ourselves to the task at hand.”
--Vince Lombardi, Past Coach of the Green Bay Packers
Leif M. Hagen
Leif M. Hagen, CLU, ChFC
LP Financial Advisor
Securities offered through LPL Financial Inc., Member FINRA/SIPC.
P.S. Please feel free to forward this commentary
to family, friends, or colleagues.
P.S.S. Also,
please remind your friends and family members becoming Medicare eligible that
we offer Medicare insurance and Part D options with NO COST to work with Leif as
their agent
For more information and resources visit our website at www.HagenFN.com
* 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
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