Wednesday, July 26, 2017

Womack Weekly Commentary: July 24, 2017



Weekly Market Commentary


July 24, 2017

The Markets

Do we have central banks to thank?

Low interest rates, accommodative monetary policy, and improving economic growth have helped stock markets around the world reach record highs, reports Barron’s:

“…a look around the globe shows the surge of the U.S. market to new peaks to be anything but unique. Major [markets] in Europe and Asia also have been setting records. Even in South Korea, the Kospi closed at a new peak and is up 25 percent from its 52-week low last year, as the global technology rally has proved to be more powerful than the threat of a nuclear-missile launch from North Korea. Last week also saw a record close in the S&P BSE Sensex in India. Japan’s Nikkei is up 25 percent from last August and near a 52-week high (albeit still down 48 percent from its 1989 bubble peak). The Shanghai Composite is a relative laggard, with a 9.6 percent gain from its August lows, bolstered by a 3.7 percent jump over the past five weeks.”

Eventually, central banks are expected to tighten monetary policy by raising interest rates and reducing the size of their balance sheets and that could affect markets. The U.S. Federal Reserve released its Policy Normalization Principles and Plans back in 2014. Last month, Chair Janet Yellen indicated the Fed currently intends to begin normalizing policy during 2017.

U.S. monetary policy isn’t the only phenomenon investors may want to keep an eye on.

Fiscal policy (the steps a government takes to influence its country’s economy) deserves some attention, too. The United States will, once again, hit its legal spending limit (the debt ceiling) this fall. U.S. News reported, “Were the United States to hit its borrowing limit – and thus have to start missing payments and stiffing creditors – there's no telling the exact consequences, but they wouldn't be good.”

The bond market does not appear to be confident fiscal policy will proceed smoothly. Barron’s reported, “Yields on T-bills that mature in mid-to-late October jumped relative to surrounding maturities, a sign that the money market saw a risk – however slight – of not getting paid on time.”


Data as of 7/21/17
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
0.5%
10.4%
14.2%
7.8%
12.9%
4.8%
Dow Jones Global ex-U.S.
0.8
16.0
17.2
0.1
6.5
-1.2
10-year Treasury Note (Yield Only)
2.2
NA
1.6
2.5
1.4
5.0
Gold (per ounce)
1.5
7.7
-5.5
-1.6
-4.5
6.2
Bloomberg Commodity Index
0.4
-5.2
-2.3
-13.8
-10.4
-6.9
DJ Equity All REIT Total Return Index
0.7
5.9
-1.4
8.7
10.1
6.4
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.

So, here’s another college conundrum: College is a hot topic. College is a hot topic. In recent years, pundits have debated whether students should attend college or skip it and start their own companies. The Thiel Fellowship, founded by tech entrepreneur Peter Thiel, offers students $100,000 to do just that.

For students who choose college, much has been made about which degrees will pay off. Some argue liberal arts degrees lack value, and technical instruction is the real ticket to success. Meanwhile, technology company leaders have reported liberal arts are essential because “they train students to thrive in subjectivity and ambiguity, a necessary skill in the tech world where few things are black and white.”

College is also known for changing the way students think. A new survey indicates it may alter their culinary perspectives. The Economist commissioned a poll to see if residence, income, education, or political affiliation has an effect on food preferences and, guess what? College and post graduate work may expand students’ gustatory preferences and change their eating habits! No, they don’t develop an unhealthy obsession with ramen noodles, boxed mac and cheese, or free food (usually). The survey found:

·         People with post graduate degrees dine out more frequently – often weekly – than people with high school diplomas.

·         Post grads also tend to eat Indian foods, like curries, more often than people with high school diplomas.

·         College grads are more likely than non-college grads to have eaten sushi within the past year.

·         College grads are also more likely than non-college grads to know what prosciutto is and to have eaten it recently.

As it turns out, the great equalizer was Mexican food. A majority of Americans have eaten Mexican food during the past year, regardless of educational attainment.

Weekly Focus – Think About It

“Peanut butter and jelly in the same jar. I don't understand that. I mean, I'm lazy but I'd like to meet the guy that needs that. This guy must be thinking, "I could go for a sandwich, but I'm not gonna open TWO jars. I can't be opening and closing all kinds of jars and cleaning WHO KNOWS how many knives.”
--Brian Regan, American comedian


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 email with their email 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 megan@womackadvisers.com

Sources:

Tuesday, July 18, 2017

Amazon Smashes Prime Day Sales Record!




July 11th, Tuesday of this past week, was the third annual “Amazon Prime Day”.  This year’s Prime Day smashed last year’s Prime Day sales record by more than 60% and now stands as the biggest sales day in Amazon’s entire history.  Even more remarkable, as research firm Morningstar points out, is that the number of households with Amazon Prime video streaming is nearing the total number of homes with cable or satellite TV. 



According to estimates from Morningstar, nearly 79 million households now have an Amazon Prime membership, up from 66 million at the end of 2016.  This compares to a projected 90 million households that pay for cable or satellite TV.  Amazon doesn’t disclose the number of Prime members, so Morningstar’s estimates are based on an analysis of Amazon’s cash-flow statements. 


On the day after Prime Day, Amazon said they had more new members joining the Prime subscription service on Prime Day than any other single day in history.  The following chart, from tech-industry commentary site “recode.net”, shows the skyrocketing Prime membership nearly intersecting the flat-to-declining cable-TV subscribership.

Womack Weekly Commentary: July 18, 2017



­Weekly Market Commentary


July 18, 2017

The Markets

It was a good week for a lot of stocks but not bank stocks.

The Standard & Poor’s 500 (S&P 500) Index and the Dow Jones Industrial Average (DJIA) both finished at record highs last week. Barron’s indicated investors owe Federal Reserve Chair Janet Yellen a debt of gratitude:

“The main force behind the rally was the dovish performance by Federal Reserve Chair Janet Yellen in Congress on Wednesday and Thursday when she reiterated that rate hikes would most likely be gradual. On balance, her remarks were interpreted as evidence of continued accommodative monetary policy and, from there, stocks were off to the races. The ignition of the rally can almost be time-stamped to her appearance. Before her speech, the market was down for the week.”

Of course, some sectors of the stock market did better than others last week. In the S&P 500, Real Estate, Information Technology, and Consumer Staples stocks had the highest percentage gains at the close on Friday, while Financials, Telecommunications, and Consumer Discretionary stocks lagged, according to Fidelity.

In the Financials sector, banks were the weakest performers, finishing Friday almost a full percent lower. It was a bit of a mystery, wrote Financial Times (FT), since several banks beat earnings expectations. FT reported:

“Perhaps the most important factor that weighed on bank stock prices, however, had nothing to do with the comments from executives nor the quarterly financial results. Macroeconomic data published on Friday showed U.S. inflation at the consumer level cooled last month while retail sales fell short of estimates, pushing Treasury bond yields lower. Lower interest rates are bad news for banks, which make more money if they can charge borrowers more.”

Investors appear to believe there is smooth sailing ahead. The CBOE Volatility Index remained below 10.


Data as of 7/14/17
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
1.4%
9.9%
13.7%
7.6%
12.7%
4.7%
Dow Jones Global ex-U.S.
2.8
15.1
16.3
-0.4
5.9
-1.3
10-year Treasury Note (Yield Only)
2.3
NA
1.5
2.6
1.5
5.0
Gold (per ounce)
1.2
6.1
-7.8
-2.0
-5.0
6.3
Bloomberg Commodity Index
1.1
-5.5
-5.1
-14.0
-10.2
-7.0
DJ Equity All REIT Total Return Index
1.4
5.1
-1.3
8.6
9.5
6.0
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.

merriam webster defines ‘disrupt’ as ‘To break apart,’ and ‘to throw into disorder.’ While disruption doesn’t sound like something anyone would enjoy much, it has the potential to create investment opportunities for those who share a vision and are willing to take risks.

Morgan Stanley recently wrote, “It’s hard to think of an industry that won’t be touched in some way by technological disruption over the next decade.” Here are a few of the trends that may really stir things up during the next few decades:

·         Machine learning. “The transportation and medical industries are likely to be first in line for disruption,” Morgan Stanley suggested. A disruptive change researcher wrote, “If we think about what machine learning really is, it’s pattern recognition. We might see radiology and scans detecting cancers earlier than they’re detected today. And it’s possible that in the future we can also use machine learning to scan for genes that might predispose us to certain kinds of diseases.”

·         Autonomous vehicles. The auto industry, as we know it, is likely to change in some significant ways when self-driving vehicles become more prevalent. Other industries will be affected, too. For instance, insurance could change dramatically. After all, who do you insure when software is driving?

In addition, cities may lose a source of revenue if there is less need for parking. CNBC wrote, “Reports estimate self-driving vehicles have the potential to reduce parking space by about 61 billion square feet, which is about the size of Connecticut and Vermont combined.” This may be a boon for the real estate market.

The responsibilities of law enforcement may change, too, and crash test dummies may be out of work.

·         Augmented reality. Imagine a surgeon being able to practice a surgery, a rigger learning their craft without scaling heights to lift heavy objects, or a teacher making students’ textbooks come alive. Augmented reality has the potential to help professionals refine their skills, make dangerous training safer, and fascinate students at all levels of learning.

Morgan Stanley also pointed out that Blockchain, which enables electronic contracts and custody, may change the financial industry, and Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR) may help cure disease at the genetic level.

We live in interesting times!

Weekly Focus – Think About It

“Companies don’t have ideas. Only people do. And what motivates people are the bonds of loyalty and trust they develop around each other.”
--Margaret Heffernan, International businesswoman and 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 email with their email 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 megan@womackadvisers.com
Sources: