PEEK OF THE WEEK
October 23, 2018
Leif Hagen & Donna Roberts
The Markets
The world remains full of
opportunities and challenges.
Although we’ve seen global
markets moving in tandem in recent years, Sara Potter of FactSet pointed out, “…we’re starting to see the end of the
synchronized global growth that has prevailed over the last two years. While
the U.S. economy remains strong, growth in Europe and Japan is moderating, and
emerging markets are under increasing economic and financial market pressure.”
Strong economic growth and
robust earnings helped U.S. stocks significantly outperform other regions of
the world during the third quarter of 2018. In addition, the resolution of some
trade tensions, namely the signing of a United States-Korea trade deal and the
renegotiation of NAFTA (North American Free Trade Agreement), helped soothe
investor concerns, reported Jeffrey Kleintop of Schwab.
The trade relationship between
the United States and China, however, remains an itchy rash marring the outlook
for economic growth in both countries. The
Economist Intelligence Unit reported:
“Since the start of 2018 trade
policy has become the biggest risk to The
Economist Intelligence Unit's central forecast for global economic growth.
We now expect this risk to materialize in the form of a bilateral trade war
between the United States and China, with negative consequences for global
growth…The trade war comes at a challenging time for the Chinese economy…The
trade war will also affect the U.S. economy…the escalating trade dispute with
China will start to weigh on growth later in 2018 and into 2019 – we now expect
growth to slow in 2019 to 2.2 percent (2.5 percent previously). The U.S.
manufacturing and agricultural sectors, in particular, will be hit by the trade
dispute, and rising interest rates will cause private consumption to slow.”
China’s economic growth slowed
during the third quarter. The nation experienced its slowest growth since 2009,
reported Reuters.
Chinese stock markets generally
lost value. However, some Chinese indices performed better than others,
depending on the type of stocks included in the index. For example, the MSCI
China Index, which measures large- and mid-cap stocks of various share types
that trade on the mainland and in Hong Kong, was down 8.45 percent during the
quarter.
In contrast, the MSCI Red Chip
Index, which is comprised of stocks that are incorporated outside of China,
trade on the Hong Kong exchange, and are usually controlled by the state or a
province or municipality, was up 3.25 percent for the quarter and flat
year-to-date.
Emerging markets were weak
performers overall during the third quarter, but there were bright spots. Schroders explained, “Turkey was the
weakest index market amid a sharp sell-off in the lira…By contrast, Thailand
recorded a strong gain and was the best performing index, with energy stocks
among the strongest names. Mexico outperformed as the market rallied following
general elections and an agreement with the United States on NAFTA
renegotiation. Taiwan, where semiconductor stocks supported performance, also
outperformed. Despite ongoing risk of new U.S. sanctions, Russian equities also
finished ahead of the benchmark, benefiting from crude oil price strength.”
Political strife continued to
hamper the European Union and the United Kingdom during the third quarter.
Overall company profits weren’t particularly impressive in the region and
neither was economic growth, reported BlackRock.
As the third quarter came to a
close, Barron’s conducted its Fall Big Money Poll. Vito Racanelli
reported almost two-thirds of professional money managers from across the
country said the U.S. stock market was fairly valued – and that was before the
market slid lower early in the fourth quarter. While the money managers’
assessment doesn’t mean all U.S. stocks are fairly valued, there may be
opportunities to invest in sound companies at attractive prices.
Trade tensions, inflation
trends, and central bank monetary policy are likely to affect the performance
of markets during the remainder of 2018 and into next year.
Data as of 10/19/18
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500
(Domestic Stocks)
|
0.0%
|
3.5%
|
8.0%
|
10.8%
|
9.7%
|
10.9%
|
|
Dow Jones Global ex-U.S.
|
-0.3
|
-11.4
|
-8.7
|
2.8
|
-0.1
|
4.3
|
|
10-year Treasury Note (Yield
Only)
|
3.2
|
NA
|
2.3
|
2.0
|
2.6
|
3.9
|
|
Gold (per ounce)
|
0.7
|
-5.3
|
-4.6
|
1.5
|
-1.4
|
4.4
|
|
Bloomberg Commodity Index
|
-0.3
|
-2.5
|
0.7
|
-1.0
|
-7.7
|
-4.7
|
|
DJ Equity All REIT Total
Return Index
|
3.1
|
-0.9
|
0.1
|
5.6
|
8.0
|
11.3
|
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.
New Trend: Pets and financial planning. Animals
have played important roles in human lives for centuries. They provide companionship,
comic relief, work assistance, transportation, reassurance, protection, and
food.
Today, emotional-support and
service animals may be found in workplaces, beauty salons, cafes, theatres,
airplanes, and many other places where our parents or grandparents would have
been surprised to find them. Landlords charge pet rent, and some service
animals qualify as a medical expense under Internal Revenue Service rules.
It is also becoming more and
more common for pet owners to include pets in their financial planning goals.
While you cannot leave your pet property, you can make arrangements to have
your pet cared for after you are gone.
Last week, The Economist reported, “Two-thirds of all horse owners in America
have made some provision in their wills for their pets, according to a survey
by the American Pet Products Association. Over a third of American pet owners
say they would pay for animal-related expenses by putting less into their
retirement accounts. And, three-quarters of those buying a home said they would
turn down an otherwise ideal property if it did not meet their animal’s needs.”
In addition, pets can become beneficiaries of trusts.
Whether you think the idea of
providing financial support for pets is silly or you wholeheartedly embrace it,
the role of animals in the lives of many Americans is changing.
Weekly Focus – Think About
It
“Animals are such agreeable
friends - they ask no questions; they pass no criticisms.”
--George Eliot (a.k.a. Mary Anne Evans),
English Novelist
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.
* To unsubscribe from the
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Sources:
http://country.eiu.com/article.aspx?articleid=987167082&Country=Nigeria&topic=Economy&subtopic=Current+policy&oid=247162408&flid=1907256774 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-22-18_TheEconomist-EIU_Global_Forecast-US-China_Trade_Ware_will_Damage_Growth-Footnote_4.pdf)
https://www.msci.com/end-of-day-data-search (Click on Country tab; select China Markets; As of
September 28, 2018) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-22-18_MSCI-China_Markets_Index_as_of_09-28-18-Footnote_6.pdf)
https://www.barrons.com/articles/stocks-will-rally-more-than-10-in-2019-barrons-big-money-poll-finds-1539979367?mod=hp_LEAD_3 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-22-18_Barrons-Stocks_will_Rally_More_than_10%25_in_2019-Big_Money_Poll_Predicts-Footnote_11.pdf)
https://www.economist.com/finance-and-economics/2018/10/13/people-are-including-pets-in-their-financial-plans
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-22-18_TheEconomist-People_are_Including_Pets_in_their_Financial_Plans-Footnote_15.pdf)
