Womack Weekly
Commentary
March 8,
2017
The Markets
It was a grand slam.
Major U.S. stock markets were positively
euphoric following President Trump’s speech on February 28. Optimism about the
new administration’s pro-growth policies propelled the four major U.S. stock
indices to record highs, despite a dearth of policy details, reported Financial Times.
It’s hard to pinpoint exactly why stocks have
moved so far, so quickly. However, it appears that mom-and-pop investors have
become quite enthusiastic about the asset class according to data from JPMorgan Chase cited by Bloomberg. While institutional investors
(pensions, insurance companies, etc.) have been reducing exposure to stocks, smaller
investors have been loading up on shares.
CNBC reported some industry professionals, including
Goldman’s chief U.S. equity strategist David Kostin, believe stocks have become
too highly valued. ZeroHedge.com quoted Kostin, who said:
“Cognitive dissonance exists in the U.S.
stock market. S&P 500 is up 10 percent since the election despite negative EPS
[earnings per share] revisions from sell-side analysts…Investors, S&P 500
management teams, and sell-side analysts do not agree on the most likely path
forward. On the one hand, investors, corporate managers, and macroeconomic
survey data suggest an increase in optimism about future economic growth. In
contrast, sell-side analysts have cut consensus 2017E [estimated] adjusted EPS
forecasts by 1 percent since the election and ‘hard’ macroeconomic data show only
modest improvement.”
Financial
Times
reported pessimism prevails in the bond market. One bond market professional
said, “The bond market is taking a totally different view from the equity
market. Blowing raspberries is a good way to put it…There’s no belief that the
growth agenda will be dramatic.”
So, is strong economic growth ahead? Do bond
investors or stocks investors have it right? Are institutional investors or
mom-and-pop investors positioning themselves correctly? Only time will tell.
Data as of
3/3/17
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500 (Domestic
Stocks)
|
0.7%
|
6.4%
|
19.6%
|
8.9%
|
11.8%
|
5.7%
|
Dow Jones Global ex-U.S.
|
-0.2
|
5.2
|
12.2
|
-1.4
|
1.7
|
-0.5
|
10-year Treasury Note (Yield Only)
|
2.5
|
NA
|
1.8
|
2.6
|
2.0
|
4.5
|
Gold (per ounce)
|
-2.2
|
5.8
|
-1.9
|
-3.1
|
-6.4
|
6.8
|
Bloomberg Commodity Index
|
-0.3
|
-0.4
|
13.4
|
-13.6
|
-9.8
|
-6.2
|
DJ Equity All REIT Total Return Index
|
-1.0
|
3.2
|
12.4
|
11.0
|
11.2
|
5.5
|
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.
don’t think so! Tax season is upon
us. That means we can all use some entertainment. While many folks dread the
process of completing and filing taxes, some see it as an opportunity to test
the boundaries of the system. Here are a few deductions Americans have taken that
have failed to pass muster in tax court, courtesy of Kiplinger.com:
·
You cannot deduct the
cost of a good night’s sleep. A tax preparer who worked from home escaped
to a hotel because her clients were calling in the wee hours of the night and
causing her to lose sleep. When she attempted to take a business deduction for
the hotel expense, the tax court ruled a good night’s sleep is a non-deductible
personal expense.
·
You cannot take a
theft loss deduction for poor construction. A couple moved into their newly built
dream home only to realize the builder had cut some corners. The house had some
serious issues, including its foundation. The couple claimed the builder had defrauded
them and took a large theft loss deduction. While taxpayers can deduct losses
from a home-related theft, shoddy construction doesn’t qualify.
·
You cannot take a
depletion deduction for bodily fluids. A woman earned $7,000 a year donating blood
plasma because of her rare blood type. She took a depletion deduction, claiming
“the loss of both her blood’s mineral content and her blood’s ability to
regenerate,” wrote Kiplinger. While
companies that take coal, iron, and other minerals from the ground can take a
depletion deduction, the tax court ruled that individuals cannot claim
depletion on their bodies.
·
You cannot deduct a
business trip if there are no formal business meetings involved. A repo firm
sponsored a trip to Las Vegas for its bank customers. The firm’s employees
chatted with clients about business on the way to Vegas, but no formal meetings
were held. The tax court denied the deduction.
Before you get
creative with your taxes, consult with a tax professional.
Weekly
Focus – Think About It
“Because of your smile, you make life more
beautiful.”
--Thich Nhat Hanh, Vietnamese Buddhist monk
and peace activist
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
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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* 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/8bb044d0-ff76-11e6-8d8e-a5e3738f9ae4 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-06-17_FinancialTimes-Bond_Investors_Send_Warning_for_Record_High_Equity_Market-Footnote_1.pdf)
https://www.ft.com/content/cc48869a-ff9b-11e6-96f8-3700c5664d30 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-06-17_FinancialTimes-Hearty_Appetite_for_US_Equity_Funds_Since_November_Election-Footnote_2.pdf)
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