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WOMACK WEEKLY COMMENTARY Renew. Regenerate. Refocus.
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April 02, 2018
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THE MARKETS
In like a lion…
Investors
roared into 2018.
During the
first week of the first quarter of the New Year, the Dow Jones Industrial
Average rose above 25,000 for the first time ever. Less than two weeks later,
it closed above 26,000. The Standard & Poor’s (S&P) 500 Index and
NASDAQ Composite also reached new all-time highs.
Strong
performance was supported by strong fundamentals. In December 2017, Mohamed
A. El-Erian wrote in BloombergView economic and policy fundamentals,
including synchronized global recovery, progress on U.S. tax reform, improved
certainty around Brexit, and orderly acceptance of changing U.S. monetary
policy, “…reinforce the prospects for better actual and future growth,
thereby increasing the possibility of improved fundamentals validating
notably elevated asset prices.”
During the
first quarter, the global economy remained robust, reported Forbes.
American companies were profitable (profitability is measured by earnings)
and earnings per share for the S&P 500 Index are expected to increase
during 2018. FactSet reported analysts currently estimate the
S&P 500 Index will deliver double-digit earnings growth (18.5 percent
overall) during 2018. Here’s what the analysts anticipate each quarter:
• Q1: Earnings
growth of 17.3 percent
• Q2: Earnings growth of 19.1 percent • Q3: Earnings growth of 20.9 percent • Q4: Earnings growth of 17.1 percent
Improving
expectations for American companies can be credited, in large part, to tax
reform, which lowered corporate tax rates significantly. In addition, rising
oil prices may help companies in the Energy sector, and rising interest rates
may give a boost to companies in the Financials sector.
Despite a
robust global economy, strong earnings, and improving earnings per share
(EPS) expectations, the major U.S. stock indices delivered negative quarterly
returns for the first time since 2015. On March 29, the last trading day of
the quarter, the Dow closed at about 24,100.
If
fundamentals are strong, why did major indices in the United States (and many
indices around the world) finish the quarter lower? Financial Times
suggested uncertainty might have something to do with the retreat:
“The tax cut
has been achieved. We are no longer so sure that [President Trump’s]
remaining ideas are so good, and most investors think his ideas about trade
are downright terrible. And so the market has started reacting to
presidential tweets… Most importantly, though, key assumptions have been
stripped away. We can no longer rely on low volatility. And critically, the
positive view of a low-inflation strong-growth future has been called into
question – but only after the stock market had priced in that assumption as a
done deal.”
Market
declines may also reflect concern about valuations. One financial
professional told Financial Times many asset classes have gone from
being very expensive to being expensive. They haven’t yet gotten inexpensive.
Out like a
lamb…
The last week
of the quarter was a good one for U.S. stock markets, which pushed higher.
However, the major indices were unable to overcome deficits accumulated
earlier in the quarter. The Dow Jones Industrial Average gained 2.4 percent
last week, finishing the quarter down 2.5 percent. The S&P 500 Index was
up 2.0 percent last week, down 1.2 percent for the quarter. Likewise, the
NASDAQ bounced 1.0 percent last week, but ended the quarter down 2.3 percent,
reported Barron’s.
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.
IF YOU ASKED ARTIFICIAL INTELLIGENCE (AI) TO BAKE, WHAT WOULD
IT MAKE? Janelle Shane at
PopSci.com wrote, “When computers try to imitate humans, they often get
confused. But simulated brain cells in so-called neural networks can mimic
our problem-solving skills. An AI will look at a dataset, figure out its
governing rules, and use those instructions to make something new. We already
employ these bots to recognize faces, drive cars, and caption images for the
blind. But can a computer cook?”
Shane
addressed the question by training a computer’s neural network to write a
recipe. The computer reviewed a dataset of more than 24,000 online recipes
(647 of them began with the word chocolate and 8 included blood as an
ingredient). After two days of processing, the network delivered a remarkable
recipe that includes a title, category, ingredients, and directions, although
the nonsensical word choices are likely to leave bakers uncertain about how
to proceed:
CHOCOLATE
BUTTERBROTH BLACK PUDDING
cheese/eggs 4 oz cocoa; finely ground 1teaspoon butter ½ cup milk ¼ teaspoon pepper ¼ cup rice cream, chopped 1 lb cream 1 sesame peel
– DATE HOLY –
1 large egg
1 powdered sugar serving barme ¼ cup butter or margarine, melted
Brown sugar,
chocolate; baking powder, beer, lemon juice and salt in chunk in greased 9x2
inch cake. Chill until golden brown and bubbly. Place serve garlic half by
pieoun on top to make more use bay. Place in frying pan in preheated oven.
Sprinkle with fresh parsley for cooking. Eating dish to hect in pot of the
oil, pullover half-and half…Yield: 1 cake”
AI seems to have missed an important
governing rule for recipes: Instructions should not include unlisted
ingredients and all ingredients should be included in the instructions. DATE
HOLY is particularly baffling. The author suggested the neural network might
have been trying for frosting. It is a cake, after all.Weekly Focus - Think About It “We are surrounded by hysteria about the future of artificial intelligence and robotics – hysteria about how powerful they will become, how quickly, and what they will do to jobs…Mistaken predictions lead to fears of things that are not going to happen, whether it’s the wide-scale destruction of jobs, the Singularity, or the advent of AI that has values different from ours and might try to destroy us. We need to push back on these mistakes.” --Rodney Brooks, Australian robotics entrepreneur
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. 100 - San Diego, CA 92122 Phone (405) 340-1717 - Toll Free (877) 340-1717 Website: www.womackadvisers.com Are you prepared for Retirement? Receive Our Free Report Today!
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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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