Womack Weekly
Commentary
September
18, 2017
The Markets
“In theory, there is no difference between theory and
practice, in practice there is.”
Yogi
Berra was talking about baseball, but the concept also applies to diversification,
according to the GMO White Paper, The S&P 500: Just Say No. From the
title, you might think the authors – Matt Kadnar and James Montier – don’t like
U.S. stocks. They do:
“Being
a U.S. equity investor over the past several years has felt glorious. The
S&P 500 has trounced the competition provided by other major developed and
emerging equity markets. Over the last 7 years, the S&P is up 173 percent
(15 percent annualized in nominal terms) versus MSCI EAFE (in USD terms), which
is up 71 percent (8 percent annualized), and poor MSCI Emerging, which is up
only 30 percent (4 percent annualized). Every dollar invested in the S&P
has compounded into $2.72 versus MSCI EAFE’s $1.70 and MSCI Emerging’s $1.30.”
The
authors’ concern is U.S. markets have performed so well, investors may be
tempted to abandon diversification and concentrate their portfolios in indexed U.S.
stocks. Kadnar and Montier wrote, “Human nature is to extrapolate the recent
past. It is easy to see, given the strong performance of U.S. equities in both
absolute and relative terms, why many are suggesting they are the only asset
you need to own.”
Focusing
assets in the United States, according to GMO,
ignores the most important determinant of long-term returns: valuation. “From
our perspective, one has to make some fairly heroic assumptions to believe that
the S&P is even remotely close to fair value.”
High
valuations haven’t dulled the appeal of U.S. stocks for investors, though. Last
week, the S&P 500 closed at a record high, and the Dow Jones Industrial
Average posted its biggest gain since last December, reported CNBC.com.
Data as of
9/15/17
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500 (Domestic Stocks)
|
1.6%
|
11.7%
|
16.4%
|
8.0%
|
11.3%
|
5.4%
|
Dow Jones Global ex-U.S.
|
0.7
|
18.9
|
18.3
|
1.6
|
4.4
|
-0.2
|
10-year Treasury Note (Yield Only)
|
2.2
|
NA
|
1.7
|
2.6
|
1.8
|
4.5
|
Gold (per ounce)
|
-1.7
|
14.1
|
0.9
|
2.3
|
-5.7
|
6.3
|
Bloomberg Commodity Index
|
0.5
|
-2.6
|
2.6
|
-11.1
|
-10.5
|
-6.9
|
DJ Equity All REIT Total
Return Index
|
0.4
|
8.1
|
7.1
|
10.5
|
9.5
|
6.7
|
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.
7 steps to protect yourself after the
equifax breach. From May through
July, hackers exploited a website vulnerability at Equifax, one of the major
consumer credit reporting agencies. If you have a credit report, there is a
chance your sensitive and personal information including Social Security
numbers, birth dates, addresses, and driver’s license numbers, may have fallen
into the wrong hands. The stolen information could be used in tandem with
passwords taken from other databases to commit financial crimes against you,
reported a source cited by Consumer Reports.
Here are seven steps to take to help protect your
assets and credit:
1. Find out if
you were affected. From a secure
computer or encrypted network connection, go to the Equifax website, www.equifaxsecurity2017.com. Scroll down and click on ‘Potential Impact.’ You
will be asked to provide your last name and the last six digits of your Social
Security number.
2. Enroll in
TrustedID Premier. If your data has
been breached, Equifax will offer enrollment in TrustedID Premier. The program
provides up to $1 million in ID theft insurance, Social Security Number
Scanning, 3-bureau credit file monitoring, and the option to freeze your Equifax
credit report.
3. Place a
fraud alert or credit freeze on your other credit reports. Experian, TransUnion, and Innovis also provide credit reporting
services. Contact each of the companies to place an alert or a freeze on your credit
report:
·
A fraud alert
warns both current and prospective lenders they must take reasonable steps to
verify your identity before providing credit. When you’re a victim of ID theft,
an alert can be put in place for up to seven years.
·
A credit freeze
is different. It restricts access to your credit report. If you request a
freeze, the credit agency will send a letter with a personal ID number (PIN).
Keep the PIN in a safe place. You’ll need it to unfreeze your accounts,
according to the Federal Trade Commission.
4. Change your
passwords. Create new passwords for
online banking, brokerage, and financial accounts. Each account should have a
unique password. Best practices suggest passwords have 12 to 14 characters.
You may want to consider using a password
management application. They’re designed to store and retrieve passwords so you
can keep track of multiple long, unique password combinations without security
issues like storing passwords improperly or failing to remember them.
5. Activate
two-factor authentication. Two-factor
authentication provides an additional layer of security for email and other accounts.
After you enter your user ID and password, you’ll be asked for a code to verify
your identity. You can have the account provider text a code to your phone, although
that creates vulnerability if your phone is stolen. A better option may be to
download an authenticator app so you can generate your own code.
6. Beware email
links. Some fraud attempts are obvious:
text or email from a Nigerian prince or an update request from a financial
institution where you don’t have an account. Others may be more difficult to
spot. As a rule of thumb, if you receive an email with a link requesting you
update or make changes to a financial account, don’t click on it. Call the
financial institution or go directly to its website to make any changes.
7. Keep an eye
on your accounts. Check bank,
brokerage, and other financial statements for suspicious transactions. If you
find unauthorized activity, report it to the institution and the proper
authorities.
If you have any questions or concerns about this
breach or the markets, please contact us.
Weekly
Focus – Think About It
“The most effective way to do it, is to do it.”
--Amelia Earhart,
American aviation pioneer
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
Are you prepared for the eventual market volatility?
Be prepared and have a
plan. Watch our new video above on successful investing, and receive a free
report on how much risk you should be taking.
P.S. Please feel free to forward this commentary
to family, friends, or colleagues. If you would like us to add them to the
list, please reply to this email with their email address and we will ask for
their permission to be added.
*
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.
*
To unsubscribe from the Womack Weekly Commentary please reply to this e-mail
with “Unsubscribe” in the subject line, or write us at megan@womackadvisers.com
Sources:
https://www.gmo.com/docs/default-source/research-and-commentary/strategies/asset-allocation/the-s-p-500-just-say-no.pdf?sfvrsn=7 (Pages 4 and 8)
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