Weekly Market Commentary
July 10, 2017
The
Markets
Things you may want to know…
Last Friday, Financial Times (FT)
published, ‘Five markets charts that matter for investors.’ Among the issues
addressed in the charts were:
·
The bond market bear
watch.
The yield on 10-year German Bunds (Germany’s government bonds) reached an
18-month high of 0.58 percent recently. Yields rose after the European Central
Bank’s Mario Draghi indicated its stimulus efforts would end at some point.
When bond yields rise, bond values fall, and that makes
rising interest rates quite a significant event for anyone who holds lower
yielding bonds. In the United States, 10-year U.S. Treasuries moved to a
seven-week high last week and then dipped lower following the release of the
Federal Open Market Committee meeting minutes, reported CNBC.com.
·
Financial companies
gaining favor. During the past month, U.S. stock markets have seen a sector rotation. FT reported:
“…S&P
financials have gained some 6 percent, with tech sliding almost 4 percent. That
still leaves financials lagging behind the S&P 500 for the year and well
behind the roughly 17 percent gain for tech. A similar story has unfolded in
Europe between banks and tech.”
Investors’ appetite for financial companies may reflect
the belief higher interest rates are ahead. Banks and other financial firms
generally benefit when interest rates rise. Investor’s
Business Daily reported:
“Several Wall Street
giants have warned of weak trading revenue in Q2, continuing the lackluster
trend in 2017…Still, bank stocks large and small have been leading in recent
weeks, helped by higher bond yields and massive buyback and dividend plans.”
Last week, the unemployment rate in the United States rose from 4.3 to
4.4 percent. It was good news according to an expert cited by Barron’s, “…the rise in labor force
participation indicates slack remains in the labor market.” That may be the
reason wages showed little improvement.
Data as of
7/7/17
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
0.1%
|
8.3%
|
15.6%
|
7.0%
|
12.4%
|
4.7%
|
|
Dow Jones Global ex-U.S.
|
-0.6
|
12.0
|
18.2
|
-1.4
|
5.3
|
-1.4
|
|
10-year Treasury Note (Yield Only)
|
2.4
|
NA
|
1.4
|
2.6
|
1.5
|
5.2
|
|
Gold (per ounce)
|
-2.1
|
4.9
|
-10.4
|
-2.5
|
-5.2
|
6.3
|
|
Bloomberg
Commodity Index
|
-1.0
|
-6.5
|
-4.4
|
-14.9
|
-10.1
|
-7.2
|
|
DJ Equity
All REIT Total Return Index
|
-1.3
|
3.6
|
-0.7
|
8.5
|
9.4
|
5.7
|
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.
It doesn’t appear to be common knowledge but there may be an affordable car crisis in the
United States. The latest Bankrate.com
Car Affordability Study found:
“…typical households in most of America’s
larger cities don’t earn enough to afford the average new vehicle, under a
common budgeting rule for buyers… The
‘20/4/10’ rule says you should aim to put down at least 20 percent of a
vehicle’s purchase price, take out a car loan for no longer than four years,
and devote no more than 10 percent of your annual income to car payments,
interest, and insurance. If you can’t stay within those lines, you can’t afford
the car.”
The only major city
where a new car remains affordable is Washington, D.C.!
For some, the obvious
solution is choosing a less expensive model. For others, the answer is buying a
used vehicle. For the latter group, here’s some bad news: even an
average-priced used car – nationally, the average price is about $19,200 – is
unaffordable for households in eight of the 25 largest cities.
Leasing is also an
option; one that may have helped create an oversupply of used cars. In July, Automotive News reported:
“…millions [of] cars
that were leased two or three years ago, many of them used compact and midsized
cars with low mileage, are heading toward auction lots and used car
dealerships. That surge in supply threatens to depress prices for new and used
vehicles, raising the risk of losses for automakers and finance companies on
lease deals. It also undercuts the value of cars customers want to trade in for
a new vehicle.”
The rising popularity
of ride-sharing and car-sharing, and the introduction of self-driving vehicles,
may also depress prices. In fact, some automakers have introduced their own
ride-sharing services.
Weekly Focus – Think About
It
“A
man is rich in proportion to the number of things he can afford to let alone.”
--Henry David Thoreau, American philosopher
and naturalist
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
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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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https://www.ft.com/content/c4de73e2-17a1-11e7-9c35-0dd2cb31823a (or
go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-10-17_FinancialTimes-Five_Markets_Charts_that_Matter_for_Investors-Footnote_1.pdf)
https://www.investors.com/news/q2-earnings-season-why-analysts-are-so-bullish/ (or
go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-10-17_InvestorsBusinessDailyNews-Earnings_Season_on_Tap-Here_are_the_3_Top_Sectors-Footnote_3.pdf)
http://www.barrons.com/articles/june-jobs-report-payrolls-climb-but-wages-dont-1499431826?mod=BOL_hp_highlight_1?mod=BOL_hp_highlight_1 (or
go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-10-17_Barrons-June_Jobs_Report-Payrolls_Climb_More_than_Expected_But_Wages_Dont-Footnote_4.pdf)
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