Womack
Weekly Commentary
April 30,
2018
The
Markets
A meeting of the minds.
The
Federal Reserve and the U.S. bond market appear to be in agreement about the
direction of interest rates. For more years than anyone cares to count, investment
professionals have been predicting the end of the bull market in bonds. Bond
guru Bill Gross called the end of the bond bull in 2011 – and called it again
in 2013. He wasn’t alone. Strategists who participated in Barron’s Outlooks anticipated
rising interest rates in 2014 and 2015, too.
The
Federal Reserve began encouraging interest rates higher in December 2015 when
it increased the Fed funds rate for the first time in a decade. However, the
yield on 10-year Treasuries remained stubbornly low. In fact, it fell below 2
percent following the rate hike and stayed there until November 2016.
Since
2015, the Fed has raised rates six times. The latest increase, along with signs
of higher inflation, helped push bond rates higher. Higher interest rates could
shift investors’ preferences in some significant ways, according to sources cited
by Barron’s:
“Two
years ago, dividend stocks provided investors a one-percentage point advantage
over risk-free rates…Now those places have been swapped…this ability to get a
“safe yield” for the first time in a decade, with no risk from falling stock or
bond prices, represents a ‘seminal shift and a huge source of competition for
the dividend allure of the stock market.’”
We may be at a turning point.
Data as of
4/27/18
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
0.0%
|
-0.1%
|
11.8%
|
8.2%
|
10.9%
|
6.7%
|
|
Dow Jones Global ex-U.S.
|
-0.5
|
-0.4
|
13.3
|
2.5
|
3.6
|
0.2
|
|
10-year Treasury Note (Yield Only)
|
3.0
|
NA
|
2.3
|
1.9
|
1.7
|
3.8
|
|
Gold (per ounce)
|
-1.1
|
1.9
|
4.7
|
3.3
|
-2.1
|
4.0
|
|
Bloomberg Commodity Index
|
-0.5
|
1.4
|
6.9
|
-4.1
|
-7.8
|
-8.4
|
|
DJ Equity All REIT Total
Return Index
|
2.9
|
-5.9
|
-1.6
|
3.9
|
5.8
|
6.0
|
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.
We’ll need a new kind of umbrella for
thiS. In
February, a new research paper disclosed a finding no one wants to hear about:
Viruses are falling from the sky. Literally. Science Daily summarized a report from the University of British Columbia. The report said:
“An astonishing number of viruses are
circulating around the Earth's atmosphere – and falling from it – according to
new research…‘Roughly 20 years ago we began finding genetically similar viruses
occurring in very different environments around the globe,’ says [University of
British Columbia virologist Curtis Suttle.] ‘This preponderance of
long-residence viruses travelling the atmosphere likely explains why – it's
quite conceivable to have a virus swept up into the atmosphere on one continent
and deposited on another.’”
The New
York Times reported the researchers journeyed to Spain and used buckets on
mountaintops to catch whatever might fall from the sky. The scientists weren’t
surprised to find viruses, but they were surprised by the quantity of viruses
captured. Best estimates suggest 800 million viruses shower every square meter
of the Earth every day.
Don’t panic! Viruses are responsible for a
lot more than diseases. Scientists theorize viruses and humans may have a
symbiotic relationship. According to Popular
Science:
“Each of us has a unique collection of
viruses although there are some species common to us all…endogenous viruses
make up some 8 percent of our genetic material. Originally, they were thought
to be nothing more than junk pieces of evolutionary history. But we now know
they have a variety of functions. One of the most studied topics…focuses on
reproduction. A particular protein encoded by one particular virus…appears to
be imperative for proper formation of the placenta.”
Good
or bad, the question remains: where do atmospheric viruses originate? No one
knows for sure. There are a variety of theories. One theory is viruses are
swept from the planet into the atmosphere. Another is viruses originate in the
atmosphere. A third is viruses arrive from outer space.
The truth is out there!
Weekly
Focus – Think About It
“The
diversity of the phenomena of nature is so great, and the treasures hidden in
the heavens so rich, precisely in order that the human mind shall never be
lacking in fresh nourishment.”
--Johannes
Kepler, German scientist
Best regards,
Womack Investment Advisers, Inc.
WOMACK INVESTMENT ADVISERS, INC.
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Phone (405) 340-1717 - Toll Free (877) 340-1717
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Womack Investment Advisers, Inc. (WIA) is
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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
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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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Sources:
https://www.barrons.com/articles/BL-INCOMB-2495 (or go
to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-30-18_Barrons-Pimcos_Gross-30-Yr_Bond_Bull_Market_Officially_Over-Footnote_1.pdf)
https://www.barrons.com/articles/stocks-could-rise-10-in-2016-according-to-market-strategists-1449899461 (or
go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-30-18_Barrons-Stock_Market_Outlook_2016-Footnote_2.pdf)
https://www.barrons.com/articles/outlook-2015-stick-with-the-bull-1418449329 (or
go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-30-18_Barrons-Outlook_2015-Stick_with_the_Bull-Footnote_3.pdf)
https://finance.yahoo.com/quote/^TNX/history?period1=1448949600&period2=1524891600&interval=1mo&filter=history&frequency=1mo (or
go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-30-18_Yahoo_Finance-CBOE_Interest_Rate-Footnote_5.pdf)
https://www.barrons.com/articles/the-stock-market-thats-never-satisfied-1524875305 (or
go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-30-18_Barrons-The_Stock_Market_Thats_Never_Satisfied-Footnote_7.pdf)
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