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
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California Office: 4660 La Jolla Village Dr., Ste. 500 - San Diego, CA 92122
Phone (405) 340-1717 - Toll Free (877) 340-1717
Website: www.womackadvisers.com
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*
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.
*
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Sources:
http://www.barrons.com/articles/dovish-yellen-spurs-markets-to-soar-1500094950?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-17-17_Barrons-Dovish_Yellen_Spurs_Markets_to_Soar-Footnote_2.pdf)
https://eresearch.fidelity.com/eresearch/markets_sectors/sectors/sectors_in_market.jhtml (Click + sign next to Financials to expand)
https://www.ft.com/content/4ad6fe30-689a-11e7-9a66-93fb352ba1fe (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-17-17_FinancialTimes-If_Earnings_Were_So_Good_Why_Did_Bank_Shares_Fall-Footnote_4.pdf)
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