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WOMACK WEEKLY COMMENTARY Renew. Regenerate. Refocus.
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February 20, 2018
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THE MARKETS
As New York Fashion Week ended, inflation strutted its stuff.
Ever since the
Federal Reserve began raising the Fed funds rate in 2015, analysts have been
anticipating higher inflation. The fact that price increases remained
relatively small was a perplexing mystery. Then, last week, inflation
increased faster than expected.
The Bureau of
Labor Statistics reported the Consumer Price Index (CPI), one measure of
inflation, rose 0.5 percent in January. As you might expect, the cost of some
items rose faster than others. For example, energy costs rose by 3.0 percent,
while the cost of food was up 0.2 percent. In total, during the last 12
months, the all-items index rose 2.1 percent. When food and energy are
excluded, the increase was 1.8 percent.
Barron’s reported, “Leaving aside the month-to-month
squiggles, the real story is that inflation is closing in on the Fed’s 2
percent target…And even if January’s rise in the CPI was overstated, a real
cyclical uptrend is under way…Deflation in the prices of consumer goods we
like to buy is ending; the rate of increase in the cost of things we have to
buy either is rising, as for food and energy, or remains high, as for
services or rent.”
Higher prices
are one side of the inflation coin; the other side is higher interest rates.
Inflation is one of the data points the Federal Reserve considers when
determining how well the economy is performing. Rising inflation signals a
robust economy. That may encourage the Fed to raise rates more aggressively
during 2018 to prevent the economy from overheating. The possibility of more
concerted Fed tightening helped bump U.S. treasury rates higher last week.
Higher
interest rates could become a boon for income-oriented investors. For years,
persistently low rates have caused some investors to accept higher risk than
they might have otherwise. As interest rates move higher, there may be
opportunities to reduce portfolio risk and still generate attractive levels
of income.
Despite
inflation-inspired volatility mid-week, stock markets around the world moved
higher. In the United States, major indices once again moved into positive
territory for 2018.
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.
WHAT DOES SUCCESS MEAN TO YOU? Albert Einstein is famous for having said, “If
at first the idea is not absurd, then there is no hope for it.” In recent
weeks, Fast Company has reported on some “world-changing ideas,”
including:
• Teaching
happiness in school. The mandate of a school being built in India
will be teaching children how to be happy. One of the co-founders said, “It’s
our view that happiness – or emotional intelligence, or balance, or
confidence, or self-esteem, or any other word for feeling good about
ourselves and our place in the world – is the foundation on which great lives
and great achievements are built.”
• Cancelling
student debt. “Collectively, [Americans] owe nearly $1.4 trillion on
outstanding student loan debt. Research shows that this level of debt hurts
the U.S. economy in a variety of ways, holding back everything from small
business formation to new home buying, and even marriage and reproduction,”
according to a February report from the Levy Economics Institute at Bard
College.
The research
estimates if the U.S. government purchased and cancelled student loan debt
the U.S. economy would increase real gross domestic product – the value of
all goods and services produced – by $861 billion to $1,083 billion over 10
years. Also, the step could lead to the creation of more than a million new
jobs every year.
• Revitalizing
Haiti with blockchain. The details are still being hammered out, but
the Blockchain Cotton Project hopes to use distributed digital ledgers
(blockchain) to manage supply chains, making it easier and less expensive to
source organic cotton. One member of the project said, “We’re still figuring
out how the farmers do the live reporting. But we hope it will replace the
normal organic or fair trade certification through a radical transparency
approach.”
What do you think? Do they pass the
absurdity test? Or are these ideas too tame? Weekly Focus - Think About It --Martin Luther King, Jr., American Baptist minister and activist 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 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.
Womack Investment Advisers, Inc. (WIA) is a registered investment adviser whose principal office is located in Oklahoma. Womack Investment Advisers, Inc. is also registered in the State of California, the State of Illinois, the State of Indiana, and the State of Texas. WIA only transacts business in states where it is properly registered, or excluded, or exempted from registration requirements.
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* These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer and should not be construed as investment advice. * This newsletter was prepared by Carson Group Coaching. Carson Group Coaching 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 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. * To unsubscribe from the Womack Weekly Commentary please reply to this email with “Unsubscribe” in the subject line, or write us at megan@womackadvisers.com. |
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