August 28,
2017
The Markets
Hope floats.
Optimism
about possible pro-growth economic policies, including tax reform and
deregulation, helped U.S. stock indices finish higher last week, reported Barron’s. It wasn’t all smooth sailing,
though. Stocks bobbed up and down as investors’ optimism was weighted by concerns
about a possible debt-ceiling battle and government shutdown.
CNN offered some insight to the historic economic impact of government
shutdowns on productivity:
“The
last time the government was forced to close up shop – for 16 days in late 2013
– it cost taxpayers $2 billion in lost productivity, according to the Office of
Management and Budget. Two earlier ones – in late 1995 and early 1996 – cost
the country $1.4 billion.”
For
investors, it’s important to distinguish between a shutdown’s potential effect
on the U.S. economy and its possible impact on U.S. stock markets. A source
cited by The New York Times reported:
“…during
all 18 government shutdowns, starting in 1976…the Standard & Poor’s
500-stock index averaged just a 0.6 percent loss over the course of those
closures. Early on in shutdown history, investors reacted very negatively.
Closures in 1976 and 1977 coincided with 3 percent declines in the [S&P
500].
As
investors grew more accustomed to shutdowns, they seemed to become more blasé
about them. During the mid-1990s and the 2013 closure, for instance, stocks
actually rose. They gained 3.1 percent during the 2013 stoppage.”
Bond
investors were relatively calm last week, according to Financial Times. Although, there were signs of “debt ceiling
jitters.” Yields on U.S. Treasuries that mature in October (when a shutdown may
occur) rose on concerns investors might not be repaid in a timely way.
No
matter what happens in September and October, keep your eyes on the horizon and
your long-term goals.
Data as of
8/25/17
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
0.7%
|
9.1%
|
12.5%
|
6.9%
|
11.6%
|
5.2%
|
|
Dow Jones Global ex-U.S.
|
1.0
|
16.6
|
14.7
|
0.4
|
5.1
|
-0.4
|
|
10-year Treasury Note (Yield Only)
|
2.2
|
NA
|
1.6
|
2.4
|
1.7
|
4.6
|
|
Gold (per ounce)
|
-0.8
|
10.9
|
-2.7
|
0.0
|
-5.1
|
6.8
|
|
Bloomberg Commodity Index
|
0.1
|
-4.8
|
-2.1
|
-12.8
|
-10.5
|
-6.6
|
|
DJ Equity All REIT Total
Return Index
|
2.1
|
6.3
|
1.3
|
8.5
|
9.9
|
6.8
|
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.
millennials are killing it! A recent article in Buzzfeed listed headlines announcing the various things Millennials
have “killed” or are “killing.” The list included Big Oil, the NFL, the workday,
the cereal industry, and bar soap.
Here’s
another industry that is being undermined by millennials’ preferences: cable
and satellite television. Millennials are leading a viewing revolution. They
are unwilling to ante up for cable and satellite subscriptions, preferring less
expensive Internet and streaming services that provide content via the World
Wide Web.
A
2017 survey from Videology found more
than half of millennial men (ages 18 to 34) have stopped paying for cable, and Forbes reported:
“…on
average, the 30-and-under crowd's primary means of consuming content is through
mobile devices, streaming, and online. That's in sharp contrast to the over-30
crowd who still rely on television for an average of more than 80 percent of
their film and TV show viewing.”
The
waning popularity of cable and satellite TV appears to have a lot to do with
cost. The typical household paid more than $1,200 a year, on average, for cable
and satellite television in 2016, according to Nerdwallet – and the cost increased in 2017. Consumer Reports wrote, “Most pay TV companies have announced
modest price hikes, but there are also new hidden fees.”
Budget-minded
millennials may be having an influence on older generations whose preferences
appear to be changing, too. GfK, a market
research company, reported:
“New
findings…show that U.S. TV households are embracing alternatives to cable and
satellite reception. Levels of broadcast-only reception [a.k.a. antenna
reception] and Internet-only video subscriptions have both risen over the past
year, with fully one-quarter (25 percent) of all U.S. TV households now going
without cable and satellite reception.”
So,
what kind of savings can be generated when you cut the cable? It all depends on
what you currently pay, but it may be worth crunching the numbers.
Weekly
Focus – Think About It
“I find television very educating.
Every time somebody turns on the set, I go into the other room and read a book.”
--Groucho Marx, American
comedian
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:
http://www.barrons.com/articles/stocks-rally-on-renewed-talk-of-tax-reform-1503725643?mod=BOL_hp_we_columns (or go
to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/08-28-17_Barrons-Stocks_Rally_on_Renewed_Talk_of_Tax_Reform-Footnote_1.pdf)
https://www.ft.com/content/a5509830-e4ad-3c7f-a821-d92c14374c21 (or
go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/08-28-17_FinancialTimes-Debt-ceiling_Debate_Starts_to_Stir_Parts_of_US_Treasuries_Market-Footnote_4.pdf)
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