Womack
Weekly Commentary
October 9,
2017
The
Markets
Slow and
steady...
It
has been 332 days since the Standard & Poor’s 500 (S&P 500) Index
experienced a 5 percent drop, reported Barron’s.
If there isn’t a selloff on Monday or Tuesday, this
will become the longest rally without such a drop.
During this period, the Index has gained 33 percent.
Think about that for a moment: 33 percent over 332 days. By Barron’s calculations, the market has
gained less than 0.1 percent per day. That’s a very slow rate of increase,
relatively speaking. The longest-ever rally without a 5 percent drop, which
began in November 1994, was accompanied by a gain of 56 percent or 0.17 percent
per day.
The most recent issue of The Economist pondered the phenomenon of the slow-as-molasses bull
market that has pushed asset prices higher:
“No one would mistake the bloodless run-up in global
stock markets, credit, and property over the past eight years for a reprise of
the ‘roaring 20s,’ or even an echo of the dotcom mania of the late 1990s. Yet
only at the peak of those two bubbles has America’s S&P 500 been higher as
a multiple of earnings measured over a ten-year cycle. Rarely have creditors
demanded so little insurance against default, even on the riskiest ‘junk’
bonds. And rarely have property prices around the world towered so high…the
world is in the throes of a bull market in everything.”
It would be a mistake to assume asset prices will continue
to move higher indefinitely. One characteristic that may signal the onset of a bear
market is investor euphoria, and we haven’t seen that. The most recent American Association of Individual
Investors’ Sentiment Survey showed 2.3 percent more investors were bullish
last week, pushing the total to 35.6 percent. That’s still well below the historic
average of 38.5 percent.
Last
week was punctuated by a senseless shooting. Our hearts and prayers are with the
people of Las Vegas.
Data as of
10/6/17
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
1.2%
|
13.9%
|
18.0%
|
9.1%
|
11.9%
|
5.1%
|
|
Dow Jones Global ex-U.S.
|
0.5
|
19.3
|
17.5
|
3.3
|
4.8
|
-1.0
|
|
10-year Treasury Note (Yield Only)
|
2.4
|
NA
|
1.7
|
2.4
|
1.8
|
4.6
|
|
Gold (per ounce)
|
-1.7
|
8.9
|
0.6
|
1.8
|
-6.6
|
5.6
|
|
Bloomberg Commodity Index
|
-0.6
|
-4.1
|
-1.9
|
-11.1
|
-10.6
|
-6.9
|
|
DJ Equity All REIT Total
Return Index
|
0.5
|
6.6
|
8.6
|
10.2
|
10.1
|
5.6
|
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.
Zombie tourism and zombie companies. Zombies have a special place in the heart of pop
culture. The undead are pivotal characters in books, movies, games, and
television shows. The practical can read The
Zombie Survival Guide. Thrill seekers can binge on The Walking Dead. Romantics have Pride and Prejudice and Zombies. Anyone looking for a laugh can
watch Shaun of the Dead or Zombieland.
If
you’re one of those people who just can’t get enough of roamers, rotters,
biters, and crawlers, you’re in for a treat: zombie tourism. National Geographic has identified several
travel destinations that are steeped in zombie legend:
1. Haiti. American zombie culture appears to have origins in
Haiti, where slaves believed death would reunite them with their gods and
homelands. The exception was suicide. If slaves took their own lives, they
“would be forced to remain in their bodies, soulless, and continue to work the
plantations.”
2. Greece. In Greece and elsewhere, folklore historians have
found anyone who died of plague or was cursed, murdered, or born on an
inauspicious day, could potentially rise from the dead. Some archeology digs have
found graves with skeletons weighted by rocks or millstones.
3. Georgia (in Europe). You won’t find any zombies here – and that’s the point. Apparently,
Georgia boasts some of the world’s most promising zombie-proof dwellings. The
village of Chazhashi, at the confluence of the lnguri and Black Rivers, has
more than 200 nearly impenetrable medieval tower houses.
Zombies
aren’t always undead humans. There are zombie companies, too. A zombie company
is debt-laden and on the edge of bankruptcy. In fact, the Organization for Economic Co-operation and Development (OECD) thinks zombie firms may be one
reason economic growth has been so slow. The
Economist reported:
“We
know that a few companies are still producing substantial productivity gains
but it may be that monetary policy, by keeping rates low, has stymied the
forces of creative destruction; ‘zombie’ companies have been kept alive,
dragging down the productivity numbers. Whatever the reason, economic growth
won't rebound until productivity perks up.”
Perhaps National
Geographic should add some quarterly earnings calls to its zombie tourism
list.
Weekly
Focus – Think About It
“Fear is the main source
of superstition, and one of the main sources of cruelty. To conquer fear is the
beginning of wisdom.”
--Bertrand Russell,
British philosopher
Best regards,
Womack
Investment Advisers, Inc.
WOMACK INVESTMENT ADVISERS, INC.
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Phone (405) 340-1717 - Toll Free (877) 340-1717
Website: www.womackadvisers.com
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*
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 indexes 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.
*
Stock investing involves risk including loss of principal.
*
Consult your financial professional before making any investment decision.
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Sources:
http://www.barrons.com/articles/stocks-hit-new-highs-as-the-bull-trots-steadily-on-1507344223 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-09-17_Barrons-Stocks_Hit_New_Highs_as_the_Bull_Trots_Steadily_On-Footnote_1.pdf)
https://www.economist.com/news/leaders/21730019-ultra-loose-monetary-policy-coming-end-it-best-tread-carefully-asset-prices-are (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-09-17_TheEconomist-Asset_Prices_are_High_Across_the_Board-Is_it_Time_to_Worry-Footnote_2.pdf)
https://www.economist.com/blogs/buttonwood/2017/01/light-bulb-moment (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-09-17_TheEconomist-The_Curious_Case_of_Missing_Global_Productivity_Growth-Footnote_9.pdf)
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