Womack Weekly
Commentary
February
27, 2017
The Markets
Once
upon a time, five blind men discovered an elephant. Each man examined a
different part of the elephant and formed a unique impression about the animal.
One believed an elephant was like a pillar, while another decided an elephant
was like a snake.
In recent weeks, stock and bond markets have been
telling different stories, too.
Following
a rally on Friday, the Dow Jones Industrial Average finished at a record high
for the 11th time last week. Reuters
reported major U.S. benchmark indices have been driven higher by optimism about
tax reform, eased regulation, and increased infrastructure spending.
Both
Reuters and Financial Times wrote some investors have become more cautious
amidst growing doubts about the pace at which the new administration’s economic
policies may be achieved, as well as concerns about the outcome of European
elections. These concerns are reflected in the bond market. Barron’s reported:
“The
market’s recent advance has taken place on expectations of the reflationary
impact of the Trump administration’s policies…the action in global bond markets
suggests something else. The 10-year U.S. Treasury yield ended the week at
2.317 percent, the lowest since late November, despite the reflation trade in
stocks and expectations of a Fed hike by June, if not May. Even more startling
was the slide in the German two-year yield, to minus 0.95 percent, by week’s
end, close to a record low, amid growing concern about France’s coming
presidential election. While stock investors are smiling at daily Dow records,
the bond crowd seems to be hunkering down.”
Who
is correct? As with the folk tale about the elephant, both stock and bond
markets may be right. Fiscal stimulus could boost economic growth, supporting
higher stock values. However, the positive effects of a potential stimulus
package are unlikely to be felt before 2018, according to Treasury Secretary
Mnuchin. In the meantime, uncertainty about governments and policies at home and
abroad may have investors opting for investments they perceive to be lower
risk, such as U.S. Treasuries, and that could keep bond yields lower than some
had expected.
Data as of
2/24/17
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500 (Domestic Stocks)
|
0.7%
|
5.7%
|
22.7%
|
8.6%
|
11.6%
|
5.0%
|
Dow Jones Global ex-U.S.
|
-0.2
|
5.4
|
18.5
|
-1.9
|
1.5
|
-1.3
|
10-year Treasury Note (Yield Only)
|
2.3
|
NA
|
1.7
|
2.8
|
2.0
|
4.6
|
Gold (per ounce)
|
1.3
|
8.2
|
0.2
|
-2.1
|
-6.7
|
6.2
|
Bloomberg Commodity Index
|
-0.7
|
0.0
|
15.4
|
-13.2
|
-10.2
|
-6.6
|
DJ Equity All REIT Total
Return Index
|
2.1
|
4.2
|
19.5
|
11.7
|
11.5
|
4.6
|
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.
the best inventions of 2016. Late last year, Time Magazine selected 25 inventions
that “are making the world better, smarter, and – in some cases – a little more
fun.” Past editions have included underground parks, gluten sniffers, and the
desktop DNA lab. For 2016, the list included:
·
Spherical tires. Intended for self-driving cars, spherical tires move in every
direction, allowing cars to maneuver in new and unexpected ways. For example, a
car can slide sideways into a parallel parking space. A critical difference
between current tires and spherical tires is magnetic levitation. That’s right.
The tires hover beneath the car instead of being bolted on.
·
Levitating light bulbs. This wireless floating light bulb “relies on
electromagnetism to levitate and spin, and on resonant inductive coupling – a
technical term for wireless power transmission – to shine.” The bulbs were so
popular, the company created levitating clocks (with custom orbits that can be
set for one minute or one year) and planters.
·
Smarter toothbrushes. The war on gum disease is never over. Dental hygiene
slackers may find using these electric toothbrushes, which vibrate every 30
seconds to remind users to switch brush position, more rewarding. Next up: a
more satisfying flossing experience.
·
Assistive tableware. If you have a loved one with a cognitive disability, assistive
tableware may provide a mealtime solution, helping users eat more and maintain
their dignity. The trick is in the design – bright colors, wide rubber bases,
and easy-to-hold cups and flatware.
·
Playful prosthetics. A new prosthetic arm for children encourages play and is likely to
make siblings and friends jealous. “When they need a hand, they have one. But
they can replace it with any number of toy-like attachments, all of which are
compatible with” a famous brand of building blocks.
It’s
always impressive to discover what a well-leavened blend of technology and
cleverness will produce.
Weekly
Focus – Think About It
“Their
conclusion: more gender diverse companies offer similar return with lower
volatility. In other words: More gender diversity, particularly in corporate
settings, can translate to increased productivity, greater innovation, better
decision-making, and higher employee retention and satisfaction.”
--Morgan
Stanley, An Investor’s Guide to Gender Diversity
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
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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:
https://www.ft.com/content/adde67ba-fa37-11e6-bd4e-68d53499ed71 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-27-17_FinancialTimes-Late_Rally_Sends_Dow_to_11th_Straight_Record_Close-Footnote_3.pdf)
http://www.barrons.com/articles/an-active-voice-for-bonds-1488000330?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-27-17_Barrons-An_Active_Voice_for_Bonds-Footnote_4.pdf)
http://www.barrons.com/articles/the-case-for-u-s-treasury-bonds-1488000294?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-27-17_Barrons-The_Case_for_US_Treasury_Bonds-Footnote_5.pdf)
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