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THE MARKETS
U.S. Treasuries are offering a
lesson in supply and demand.
Last week,
the U.S. Treasury auctioned $258 billion in bonds. Treasury auctions are
the way the United States government finances its debt. The Treasury sells
short-, intermediate-, and long-term IOUs, known as bills, notes, and
bonds. When investors and governments purchase bonds, they agree to lend
money to the United States. In return, the United States agrees to pay an
amount of interest over a certain period of time. At the end of that time,
the government is expected to repay the money borrowed.
The price
and interest paid on U.S. government debt is determined by supply and
demand. When there are few bonds and a lot of demand, prices rise and
interest rates fall. When there are a lot of bonds and little demand,
prices fall and interest rates rise.
Last week, Barron’s
reported, “The law of supply and demand meant that the glut of new
Treasuries temporarily drove down prices and pushed up yields. The 10-year
Treasury climbed during the week – brushing 2.95 percent – but ultimately
lost half a basis point, ending at 2.87 percent. (A basis point is a
hundredth of a percentage point.)”
The Treasury
increased its debt issuance to fund tax reform and the two-year federal
budget. Reuters reported, “…tax reform is expected to add as much as $1.5
trillion to the federal debt load, while the budget agreement would
increase government spending by almost $300 billion over the next two
years.”
A surplus of
Treasury bonds, in tandem with decreased demand as the Federal Reserve
reduces the holdings it accumulated during quantitative easing (an
unconventional monetary policy in which a central bank purchases government
securities in order to lower interest rates, increase the money supply, and
stimulate the economy), could push Treasury rates higher. In addition, MarketWatch
reported the Federal Reserve appears to be committed to gradually
increasing the Fed funds rate to avoid an overheating economy and keep
inflation down.
Higher
interest rates may be coming.
Data as of 2/23/18
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
0.6%
|
2.8%
|
16.3%
|
9.2%
|
13.1%
|
6.3%
|
|
Dow Jones Global ex-U.S.
|
0.1
|
1.6
|
19.3
|
4.9
|
4.6
|
0.7
|
|
10-year Treasury Note (Yield Only)
|
2.9
|
N/A
|
2.4
|
2.1
|
1.9
|
3.9
|
|
Gold (per ounce)
|
-1.8
|
2.4
|
6.4
|
3.3
|
-3.5
|
3.5
|
|
Bloomberg Commodity Index
|
0.6
|
0.6
|
1.5
|
-4.5
|
-8.4
|
-8.2
|
|
DJ Equity All REIT Total Return Index
|
-0.3
|
-8.0
|
-3.6
|
2.2
|
7.4
|
6.9
|
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.
OLYMPIC ATHLETES HAVE TO PAY THE BILLS, TOO.
Not every American Olympian and Paralympian
is a household name. Money.com
reported, “These athletes don’t have the same kind of lucrative sponsorship
deals as Olympic standouts like snowboarder Shaun White or alpine skiing
star Lindsey Vonn – so they have to make ends meet, which can often mean
squeezing in extra shifts during the off season, heading to the gym early
in the morning before work and moving from a full-time position to a
part-time one with no replacement for those lost wages.”
So, how do
lesser-known athletes pay the bills while training?
• Sled
hockey player Josh Pauls is a sales account executive. His teammate Steve
Cash is a personal banker.
• Pairs figure skater Chris Knierim works as
an auto mechanic and wants to have his own auto shop someday.
• Biathlon competitor Lowell Bailey is a
singer and songwriter who plays in bluegrass bands.
• Curling team member Nina Roth is a
registered nurse. Her teammate Tabitha Peterson is a pharmacist.
• Snowboarder Jonathan Cheever is a licensed
plumber.
• Luger Emily Sweeney is a member of the
National Guard, and so is bobsledder Nick Cunningham.
• Short track speed skater Jessica Kooreman
has a real estate license.
• Luger Justin Krewson is a firefighter.
• Snowboarder Mike Schultz designs and
engineers prosthetics.
• Nordic skier Kendall Gretsch works in tech
support.
There is a lot to admire about Olympic
and Paralympic athletes.
Weekly
Focus - Think About It
“There are only three ways to
meet the unpaid bills of a nation. The first is taxation. The second is
repudiation. The third is inflation.”
--Herbert Hoover, 31st President
of the United States
Best regards,
Womack Investment Advisers, Inc.
WOMACK
INVESTMENT ADVISERS, INC.
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15th Street - Edmond, OK 73013
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Website: www.womackadvisers.com
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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.
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