Monday, March 27, 2017
Weekly Market Commentary
March 27, 2017
The Markets
You’ve read it before – and it’s true. Markets hate uncertainty.
Failure to pass the American Healthcare Act, which was supported by Republican leaders in Congress and President Trump, may have spooked U.S. stock markets last week.
In an article titled, “How To Make Investing Decisions Based On Politics: Don't,” Nasdaq.com reported controversy over the bill was “raising questions about [Republicans’] ability to focus on and pass policies that the market has been eagerly anticipating, such as tax reform and infrastructure spending.” Financial Times concurred:
“The post-election stock market rally has been largely powered by hopes Donald Trump’s administration would swiftly launch a bevy of aggressive economic stimulus measures, including tax cuts, deregulation, and infrastructure spending. However, Mr. Trump’s difficulty in Congress over the government’s healthcare plan has prompted some reappraisal by investors of the prospect of significant stimulus arriving later this year.”
Financial Timespointed out it’s likely other factors played a role in investors’ decision-making, as well. Some professionals have become concerned about market valuations. About 34 percent of fund managers believe global equity markets are overvalued and 81 percent say U.S. equities are the most expensive in the world, reported Fortune Magazine citing Bank of America Merrill Lynch’s survey of fund managers.
In addition, estimates for corporate earnings have been revised lower for the first quarter of 2017. Take that with a grain of salt, though. FactSet wrote, “In terms of estimate revisions for companies in the S&P 500, analysts have made smaller cuts than average to earnings estimates for Q1 2017 to date…”
Politics is one factor affecting markets, and partisanship may be affecting consumer sentiment. Richard Curtin, chief economist ofUniversity of Michigan Surveys of Consumers, said consumers’ expectations about future economic growth were split along party lines in March. “…among Democrats, the Expectations Index at 55.3 signaled that a deep recession was imminent, while among Republicans the Index at 122.4 indicated a new era of robust economic growth was ahead.”
We live in interesting times!
Data as of 3/24/17 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
Standard & Poor's 500 (Domestic Stocks) | -1.4% | 4.7% | 15.1% | 8.1% | 10.6% | 5.0% |
Dow Jones Global ex-U.S. | 0.0 | 7.8 | 13.2 | -0.2 | 2.2 | -0.9 |
10-year Treasury Note (Yield Only) | 2.4 | NA | 1.9 | 2.7 | 2.2 | 4.6 |
Gold (per ounce) | 1.5 | 7.6 | -0.3 | -1.6 | -5.8 | 6.5 |
Bloomberg Commodity Index | -0.7 | -3.4 | 6.7 | -14.0 | -10.2 | -6.7 |
DJ Equity All REIT Total Return Index | 0.4 | 1.5 | 7.6 | 10.9 | 10.3 | 4.8 |
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 ain't what you don'tknow that gets you into trouble.It's what you know for sure that just ain't so,” wrote Mark Twain.
In 2016, NerdWallet commissioned a survey* to get a better handle on Americans’ thoughts about lying when money is involved. It’s interesting to note which money-saving lies participants found acceptable. The list included:
· Logging on to someone else’s retail or media account to avoid subscription fees (33 percent)
· Not reporting under-the-table income to avoid taxes due (24 percent)
· Lying about your age or your child’s age to receive a discount at a restaurant or retailer (21 percent)
· Lying about annual mileage to lower auto insurance rates (20 percent)
· Lying about income on a loan or credit card application (12 percent)
· Lying about smoking tobacco to lower life insurance rates (11 percent)
(The number in the parentheses reflects the percent of those surveyed who said the lie was okay.)
The survey found far more men than women believe it is acceptable to tell lies to save money. For instance, 30 percent of men said it was okay not to report under-the-table income to the IRS. Only 18 percent of women agreed. One-fourth of male survey participants thought it was okay to fudge annual mileage to receive lower auto insurance rates, while just 16 percent of female respondents agreed.
Age also makes a difference. Americans who are age 65 or older were far less likely to find financial dishonesty acceptable:
“The survey found that 11 percent of seniors say it is acceptable to use someone else’s paid account for online movies, music, or articles to save on subscription costs, compared with 39 percent of Americans ages 18-64. Just 7 percent of Americans ages 65 and older think it’s acceptable to lie about annual mileage for lower auto insurance rates compared with 23 percent of Americans ages 18-64. Among all of the lies in the survey, the one that gets the most support from those 65 and older is not disclosing under-the-table income to the IRS in order to pay less in taxes – 14 percent say that’s acceptable.”
When it came down to it, “For all questions, retirees had the lowest rates of acceptance of lies compared with students, employees, and the unemployed.”
*The survey included 2,115 Americans, ages 18 and older, and was conducted February 18-22, 2016, by Harris Poll on behalf of NerdWallet. This survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated.
Weekly Focus – Think About It
“I believe that there is a subtle magnetism in Nature, which, if we unconsciously yield to it, will direct us aright.”
--Henry David Thoreau, American author
Best regards,
Womack Investment Advisers, Inc.
WOMACK INVESTMENT ADVISERS, INC.
Oklahoma / Main Office: 1366 E. 15th Street - Edmond, OK 73013
California Office: 4660 La Jolla Village Dr., Ste. 500 - San Diego, CA 92122
Phone (405) 340-1717 - Toll Free (877) 340-1717
P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
* These views are those of Peak Advisor Alliance, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance 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 indices 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.
* 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 Womack Weekly Commentary please reply to this e-mail with “Unsubscribe” in the subject line, or write us at michelle@womackadvisers.com
Sources:
Bloomberg by Brian K SullivanAnother wave of tornado-spawning thunderstorms is set to rip across the Great Plains and South this week, putting the U.S. within reach of a record year for life-threatening twisters.
Severe storms will drench a swath of the country from Texas to Mississippi over the next five days, according to the U.S. Storm Prediction Center. Through Thursday, 369 tornadoes have been reported across the country, the most in five years and more than double the normal number of sightings.
An active jet stream and unusually balmy weather are to blame for the burst of deadly tornado activity, the storm prediction center said. Strong winds have dragged storms into the warm, humid air that’s blanketed the eastern half of the nation, creating conditions ripe for a weather phenomenon that leads to at least $400 million in damage a year in the U.S.
“We have a severe threat starting today and continuing for each of the next five days through at least Monday,” said Patrick Marsh, warning coordination meteorologist at the storm prediction center in Norman, Oklahoma. “Through mid-March, we are on a record or near-record pace.”
The atmospheric moisture across the southern U.S. in January was more typical of April, Marsh said. A confirmed tornado touched down in central Massachusetts in February, a first, while there was still snow on the ground.
The peak of tornado season varies across the country. Activity is concentrated in the Southeast early in the year, drifting into the Great Plains’ “Tornado Alley” in May and June before heading into the Northeast by early summer.
The U.S. has more tornadoes than any other country, according to a report by Lloyd’s of London. The nation averages about 1,200 tornadoes a year, with the storms killing as many as 60 people and injuring 1,500, Lloyd’s said.
Tornado “outbreaks,” or storm systems that spin out multiple funnels in a limited time and area, are becoming more frequent in the U.S., according to study published in the journal Science in December. Still, the trend isn’t consistent from what some models predicted would result from global warming, the study found.
This could mean climate change isn’t having an impact on tornado numbers, or it may be because scientists just haven’t figured out what effect it’s having, lead author Michael Tippett, a senior research scientist at Columbia University’s International Research Institute for Climate and Society in Palisades, New York, said in the report.
Rising Costs
One thing’s for certain: Costs associated with tornado damages are rising as the number of people living in the path of twister-producing storms rises.
“Since 1980, losses due to severe thunderstorm events in the U.S., which includes tornadoes, hail and straight-line winds, have increased dramatically largely due to socioeconomic effects,” Mark Bove, a senior research meteorologist for Munich Reinsurance America Inc, said in an email.
The system pushing into the central U.S. may create more severe weather as it pushes east, said Bob Oravec, senior branch forecaster with the Weather Prediction Center in College Park, Maryland.
“It definitely is going to have the potential for a multi-day event,” Oravec said.
And it could just be the first of several such systems, he said. Long-range models show the potential for a train of storms through the central U.S. for the next few weeks.
Bloomberg by Lananh Nguyen & Robert FullemDollar bears are back from the wilderness.
The currency slid to the lowest since November on Wednesday, and options show investors are becoming more pessimistic on the greenback versus the euro and yen. The dollar has almost erased its gains from the so-called Trump Trade, as pro-growth policies from the presidential administration have yet to materialize. UBS AG’s wealth-management unit recommended selling the dollar against the euro, and JPMorgan Chase & Co., the world’s second-biggest currency trader, advised clients to ditch bullish bets in the short term.
“The case has become more compelling” to short the dollar, said Constantin Bolz, a foreign-exchange strategist at UBS in Zurich. The bullish dollar consensus since Donald Trump’s election in November “is turning step by step” as markets question U.S. policies and their effectiveness.
UBS sees the euro-dollar exchange rate climbing as high as $1.15 over the next six months from $1.0796 Wednesday. It expects dollar-yen to fall to below 110 yen in the same period.
The U.S. currency has fallen 3.8 percent this year as traders awaited details on the size and scale of fiscal-stimulus proposals and cues from the Federal Reserve about the path of interest-rate increases. The weakness follows four years of gains as the world’s largest economy recovered from the financial crisis and the Fed began to nudge borrowing costs higher. The Bloomberg Dollar Spot Index dropped 0.2 percent Wednesday.
Technical Indicators
In options markets, protection against a rising dollar is getting cheaper as the outlook on the currency becomes more pessimistic. Risk reversals, an indicator of market sentiment and option positioning, have been signaling a shift away from dollar bullishness.
The EUR/USD one-year risk reversal, the extra cost to protect against euro declines, versus the cost to protect against gains, has been getting cheaper and has plunged as markets discount the prospect of Marine Le Pen winning the French election.
Investors are also less bearish against the euro versus the dollar. The so-called smile of one-year volatility, which reflects the cost of protecting against low-probability events, has flattened.
Similarly, the dollar-yen one-year risk reversal, which reflects the extra cost of protecting against yen appreciation, has gone up. That means investors see yen gains as more likely.
Another bearish signal is the Bloomberg dollar spot index’s 50-day moving average crossing under its 100-day moving average.
Today the stock markets are experiencing a pull-back of 1% or more—the biggest drop in the markets in the last 2 months. What does it mean? Is the Trump stock market rally in jeopardy, or is it just a pause before the next leg up?
Now is a good time to evaluate your investment risk level and adjust your portfolio accordingly. Do you know your risk number? Get your free, no-obligation report on your risk level. This report will let you know if you are taking too much risk or not enough risk.Click here to complete your personal risk profile. You’ll receive your Riskalyze report via email.
Please call (877-340-1717) or email (raegan@womackadvisers.com) with any questions.
Weekly Market Commentary
March 20, 2017
The Markets
Three steps and no stumble…
Technical analyst Edson Gould developed a market rule of thumb known as ‘three steps and a stumble.’ It states stock prices may fall after the Federal Reserve (Fed) raises the Fed funds rate three times in a row without a decline, according to Market Technicians Association. [1]
The idea is three increases show the Fed is serious about keeping rates at a relatively high level for a significant length of time. Higher interest rates could potentially mean higher costs and lower profits for businesses. As a result, stock investors may sell shares and share prices may fall. [2]
Last week, with employment and inflation data approaching Fed targets, the Federal Open Market Committee raised rates for the third time, pushing the Fed funds target rate into the 0.75 percent to 1 percent range, reported Financial Times: [3]
“Fed policymakers’ forecasts for growth and inflation remained little changed, with growth tipped to be 2.1 percent this year and next year, slipping to 1.9 percent in 2019. Core inflation is set to be 1.9 percent in 2017 and 2 percent in the two following years. The possibility of looser fiscal policy emerging from Congress has triggered speculation that the central bank will have to further accelerate its rate-rising campaign, but a number of policymakers are insistent that they want to see firmer plans emerging from Congress before making a call on the impact of possible tax cuts on the economy.”
Major U.S. stock market indices finished the week higher, as did most markets in Europe and Asia. [4] MarketWatch indicated Asian markets were encouraged by indications the Fed may not increase rates as often as expected this year, [5] and CNBC reported European markets were boosted by a better-than-expected outcome for mainstream parties in Dutch elections. [6]
Data as of 3/17/17 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
Standard & Poor's 500 (Domestic Stocks) | 0.2% | 6.2% | 16.6% | 8.6% | 11.0% | 5.4% |
Dow Jones Global ex-U.S. | 2.4 | 7.8 | 10.8 | -0.4 | 2.0 | -0.6 |
10-year Treasury Note (Yield Only) | 2.5 | NA | 1.9 | 2.7 | 2.4 | 4.6 |
Gold (per ounce) | 2.2 | 6.1 | -2.9 | -3.7 | -5.8 | 6.5 |
Bloomberg Commodity Index | 1.0 | -2.7 | 4.8 | -14.1 | -10.3 | -6.5 |
DJ Equity All REIT Total Return Index | 2.3 | 1.1 | 5.5 | 10.3 | 10.1 | 4.8 |
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.
I spy with my little eye…Robots!If you take a cruise anytime soon, the bartender may not be able to lend an ear. According to Financial Times, one cruise line has installed robotic bartenders that produce one drink per minute per arm, and can make up to 120 drinks an hour. [7]
It’s not just cruise lines, either. The food industry in the United States is automating. Financial Times described food preparation at a pizza restaurant in California: [7]
“…Pepe squirts tomato sauce on to a pizza base before his colleague Marta spreads it; Noel has 22 seconds to correct any imperfections and add cheese and other toppings, after which Bruno takes the pizza from the line and places it in the oven. But on this production line, only Noel is human. The others – anthropomorphised by name only – are machines conducting tasks usually performed by people.”
The restaurant has 75 human employees who earn about $18.00 an hour. They all are given opportunities to take coding classes so they can better understand and manage robots as well as the artificial intelligence used to evaluate delivery routes. [7]
Then, there is Sally, a robot offered by a food robotics firm. Sally can produce “… fully-customized, fresh, and healthy salads. Sally’s proprietary technology dispenses measured quantities of more than 20 ingredients – refreshed daily – to create a ready-to-eat meal any time of day.” Alternate versions of this robot will offer Mexican and Indian food choices. [8]
Competition for employees is becoming a significant issue in the restaurant industry, reported the National Restaurant Association. More than a quarter of restaurant operators, who participated in a January 2017 survey, said recruiting and retaining employees is the single most important challenge they face – a 9 percent jump from 2015. That’s the highest level since October 2007. [9]
Soon, the attraction for young children at burger joints may be watching robotic characters pull together kids’ meals!
Weekly Focus – Think About It
“There is a point in every contest when sitting on the sidelines is not an option.”
--Dean Smith, Former Head Coach, University of North Carolina Tar Heels [10]
Best regards,
Womack Investment Advisers, Inc.
WOMACK INVESTMENT ADVISERS, INC.
Oklahoma / Main Office: 1366 E. 15th Street - Edmond, OK 73013
California Office: 4660 La Jolla Village Dr., Ste. 500 - San Diego, CA 92122
Phone (405) 340-1717 - Toll Free (877) 340-1717
P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
* These views are those of Peak Advisor Alliance, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance 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 indices 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.
* 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 Womack Weekly Commentary please reply to this e-mail with “Unsubscribe” in the subject line, or write us atmichelle@womackadvisers.com
Sources: