Weekly Market
Commentary
June 25,
2018
The
Markets
What time is it?
The
yield curve may be the pocket watch of economic indicators. It’s been around
for a long time and it’s often right, but not always.
The
yield curve is the difference between the interest paid on two-year government
bonds and 10-year government bonds. In normal circumstances, an investor would
expect to earn a higher rate of interest when lending money to a government for
10 years than when lending money for two years because there is more risk
associated with lending for a longer period of time.
When
the yield curve flattens or inverts, it suggests a shift in investors’
expectations. Financial Times
explained:
“The
slope made up of bond yields of various maturities has a record of predicting
recessions that would make even the savviest econometrician turn pea-green with
envy. It is not perfect, but the curve has become flat and inverted – when
short-term bond yields are actually higher than long-term ones – ahead of most
economic downturns in most major countries since the second world war.”
In
the United States last week, the difference between yields on 2-year Treasuries
(2.56) and 10-year Treasuries (2.90) flattened. The gap narrowed to 34 basis
points (a basis point is one-hundredth of one percent). The change reflects higher
short-term rates, courtesy of the Federal Reserve. It also suggests tariffs and
trade issues have made bond investors more pessimistic about prospects for U.S.
growth, reported The Wall Street Journal.
Globally,
the yield curve is inverted. “The average yield of bonds in JPMorgan’s broadest Government Bond Index that mature in
seven to 10 years last week slipped below the average yields of bonds maturing
in one to three years for the first time since 2007…that indicates that
investors have a pretty grim view of where the world economy and equity markets
are heading,” reported Financial Times.
We’re keeping an eye on developments in the financial
markets and will keep you informed.
Data as of
6/22/18
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
-0.9%
|
3.0%
|
13.2%
|
9.1%
|
11.9%
|
7.7%
|
|
Dow Jones Global ex-U.S.
|
-1.2
|
-3.8
|
6.5
|
2.2
|
4.9
|
0.5
|
|
10-year Treasury Note (Yield Only)
|
2.9
|
NA
|
2.1
|
2.4
|
2.6
|
4.2
|
|
Gold (per ounce)
|
-1.3
|
-2.1
|
1.5
|
2.3
|
-0.3
|
3.7
|
|
Bloomberg Commodity Index
|
-0.4
|
-1.0
|
10.0
|
-4.4
|
-7.1
|
-9.2
|
|
DJ Equity All REIT Total
Return Index
|
2.4
|
0.3
|
3.4
|
7.8
|
9.7
|
7.9
|
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.
You knew carrots were good for your
eyes, and a newly discovered use for the orange
veggie may help farmers and/or food processing companies find a new source of
revenue. That’s because carrots can make concrete stronger – and so do sugar
beets.
Engineers at Lancaster University in the
United Kingdom are infusing nano platelets from discarded carrots and root
vegetable peels into concrete. This strengthens the material in an environmentally
friendly way. Durability + Design
reported:
“These vegetable-composite concretes were
also found to out-perform all commercially available cement additives, such as
graphene and carbon nanotubes and at a much lower cost…The root vegetable nano
platelets work both to increase the amount of calcium silicate hydrate – the
main substance that controls the performance of concrete – and stop any cracks
that appear in the concrete.”
The
Economist reported adding 500 grams of platelets reduced the amount of cement
required to make a cubic foot of concrete by 10 percent. In addition to
reducing the amount of building material needed for a project, carrot concrete
also reduces CO2 emissions.
Another natural material is getting a makeover,
too. Researchers at the University of Maryland are refining processes that make
wood stronger than steel, reported Scientific
American. It may compete with titanium alloys and have applications beyond building:
“A
five-layer, plywood-like sandwich of densified wood stopped simulated bullets
fired into the material – a result Hu and his colleagues suggest could lead to
low-cost armor. The material does not protect quite as well as a Kevlar sheet
of the same thickness, but it only costs about 5 percent as much, he notes.”
If demand for carrots
(and sugar beets and wood) increases and supply remains constant then we may
see prices for those goods increase.
Weekly
Focus – Think About It
“A person with
a new idea is a crank until the idea succeeds.”
--Mark Twain, American author and
humorist
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
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.
*
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Sources:
https://www.ft.com/content/49d0229e-73c7-11e8-aa31-31da4279a601 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-25-18_FinancialTimes-Flat_Yield_Curve_Sends_a_Grim_Message_for_Investors_in_2019-Footnote_1.pdf
https://www.wsj.com/articles/trade-tensions-pinch-u-s-yield-curve-1529432210
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-25-18_WSJ-Trade_Tensions_Pinch_US_Yield_Curve-Footnote_4.pdf
https://www.economist.com/science-and-technology/2018/06/14/making-buildings-cars-and-planes-from-materials-based-on-plant-fibres (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-25-18_TheEconomist-Making_Buildings_Cars_and_Planes_from_Materials_Based_on_Plant_Fibres-Footnote_6.pdf
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