Weekly Market
Commentary
June 19,
2017
All eyes on inflation!
Inflation
is the way economists measure changes in the prices of goods and services. The
United States has enjoyed relatively low inflation for a significant period of
time. Last week, the consumer price index indicated inflation had moved lower
in May.
Inflation
is our focus because it is at the core of two very different opinions that currently
are influencing markets and investors. A commentary on the Kitco Blog explained:
“One
of the most important economic debates today is whether the economy will
experience reflation or deflation (or low inflation) in the upcoming months.
Has the recent reflation been only a temporary jump? Or has it marked the
beginning of a new trend? Is the global economy accelerating or are we heading
into the next recession?”
Another
key factor is employment. Traditional economic theory holds when unemployment falls
(i.e., when more people are employed) inflation will rise because demand for
workers will push wages higher. That hasn’t happened yet in the United States even
though unemployment has fallen significantly.
In
fact, inflation remains stubbornly below the Federal Reserve’s 2 percent target,
reported The Economist. Regardless, the
Federal Reserve believes higher inflation is ahead, so it raised the Fed funds
rate last week and indicated it was preparing to shrink its balance sheet if
the economy continues to grow as expected.
There
is a group that disagrees with the Fed. They believe inflation will remain low
regardless of employment levels. Barron’s
wrote:
“In
the theoretical world, low unemployment threatens to unleash a torrent of
inflation, which needs to be staved off by tighter monetary policies. Back in
the real world, disruption, innovation, and competition relentlessly drive down
prices while wage growth is hard to come by.”
The
difference of opinion was apparent in stock and bond markets last week. In the
bond market, yields on 10-year Treasuries moved lower after the Federal Reserve
raised rates. In the U.S. stock market, the top-performing sectors were
Industrials, which tend to do well when investors are optimistic about growth,
and Utilities, which tend to do well when investors are worried about the
future.
Data as of
6/16/17
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
0.1%
|
8.7%
|
17.1%
|
7.9%
|
12.6%
|
4.7%
|
|
Dow Jones Global ex-U.S.
|
-0.4
|
12.7
|
19.7
|
-0.8
|
5.6
|
-1.2
|
|
10-year Treasury Note (Yield Only)
|
2.2
|
NA
|
1.6
|
2.6
|
1.6
|
5.3
|
|
Gold (per ounce)
|
-0.9
|
8.3
|
-4.2
|
-0.6
|
-4.9
|
6.7
|
|
Bloomberg Commodity Index
|
-1.4
|
-7.1
|
-6.8
|
-15.5
|
-9.0
|
-7.4
|
|
DJ Equity All REIT Total
Return Index
|
1.4
|
6.0
|
5.8
|
10.1
|
10.8
|
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.
a century-old medicine may help with
autism. Estimates from the Centers for
Disease Control suggest one in every 68 American children has been identified
with autism spectrum disorder. Few effective treatments have been found, but a
medicine that has been around for more than a century may prove helpful.
The Economist reported a very small human trial – only 10 boys were
involved – showed a drug used since 1916 to treat the sleeping sickness spread
by tsetse flies, may help children with autism. The trial paired the
participating boys by age, IQ, and their level of autism. In each pair, one boy
received the drug and the other received a placebo:
“Every
participant given suramin showed statistically significant improvements in
their performance on the tests at seven days. Those on the placebo showed no
significant improvement. At 45 days, the boys who were given the drug were
performing better on the tests than they had before the infusion, but it was
clear that as suramin was leaving their system, their autistic traits were
returning.”
The
study’s results were published in the Annals
of Clinical and Translational Neurology in late May; however, the research
summary did not include parent’s personal statements. The study’s first author Dr.
Robert Naviaux published those statements on his website.
One
parent wrote, “Immediately after the infusion, a kind of inner cheerfulness
started to come out. When we were walking back to the car, he was holding me
hand. He started giggling and looked up at me and said, ‘I just don’t know why
I’m so happy.’”
Another
wrote, “In fact, his teachers at school were unaware of the trial and one day
we got a note from the teacher asking about what we had changed. We were
naturally concerned and when we asked they told us that, 'He has completed 3
weeks of schooling in 3 days!'”
Let’s hope larger trials prove the drug to be safe and
its positive effects enduring.
Weekly
Focus – Think About It
“If
you’ve met one person with autism, you’ve met one person with autism.”
--Dr. Stephen Shore, Autistic professor of
special education at Adelphi University
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
Website: www.womackadvisers.com
P.S. Please feel free to forward this commentary
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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/bond-yields-are-going-up-right-not-so-fast-1497674052?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-19-17_Barrons-Bond_Yields_are_Going_Up_Right-Not_So_Fast-Footnote_1.pdf)
https://www.economist.com/news/finance-and-economics/21723422-economists-and-federal-reserve-are-not-about-abandon-phillips (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-19-17_TheEconomist-Inflation_Has_Not_Yet_Followed_Lower_Unemployment_in_America-Footnote_4.pdf)
http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html (Click on U.S. & Intl Recaps, then "Central
banks move markets")
http://www.barrons.com/articles/is-the-federal-reserve-living-in-the-real-world-1497674080?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-19-17_Barrons-Is_the_Federal_Reserve_Living_in_the_Real_World-Footnote_6.pdf)
http://www.barrons.com/articles/stocks-mostly-edge-forward-on-muddled-data-1497675744?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-19-17_Barrons-Stocks_Mostly_Edge_Forward_on_Muddled_Data-Footnote_7.pdf)
http://www.economist.com/news/science-and-technology/21722732-it-was-only-initial-trial-suramins-effects-were-dramatic?zid=318&ah=ac379c09c1c3fb67e0e8fd1964d5247f (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-19-17_TheEconomist-A_Drug_Used_to_Treat_Sleeping_Sickness_May_Also_Help_with_Autism-Footnote_9.pdf)
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