Womack Weekly Commentary
July 23, 2018
The Markets
Last
week, there was some good news and some notable news.
Here’s
the good news: Corporate earnings have been strong. As of July 20, 17 percent
of the companies in the Standard & Poor’s 500 Index had reported second
quarter results. More than 85 percent of those companies reported positive
earnings surprises, according to FactSet,
which means they earned more than expected.
“It
appears the lower tax rate is more than offsetting the impact of rising costs,
resulting in a record-level net profit margin for the index for the second
quarter,” explained FactSet.
Here’s
the notable news: U.S. stock markets largely ignored a slew of domestic and
global issues to finish up a basis point or two last week. (Performance was
flat when you round to one place, as we do in the table.) Barron’s reported:
“President
Donald Trump took on the Federal Reserve, telling an interviewer that he’s ‘not
happy’ about rising interest rates, the kind of meddling we haven’t seen in a
while. We also had the usual trade war concerns, as the president and his
advisors talked about the need to take on what they consider China’s unfair
trade practices. China’s yuan, meanwhile, tumbled in a way that was a little
too reminiscent of August 2015, when its slide caused global markets to
shudder. Those concerns, however, were offset by strong corporate earnings.”
The U.S. bond market has been
less sanguine than the U.S. stock market. Debate has focused on the flattening
yield curve. The yield curve reflects the difference in yield on U.S.
Treasuries from short- to long-term. Normally, investors expect to earn higher
yields when they lend their money for longer periods of time (e.g. invest in
longer-term bonds).
At the end of last week,
two-year U.S. Treasuries yielded 2.6 percent and 30-year Treasuries yielded 3.0
percent. Some say when short-term rates rise above long-term rates, inverting
the yield curve, recession is ahead.
Data as of
7/20/18
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
0.0%
|
4.8%
|
13.3%
|
9.6%
|
10.6%
|
8.3%
|
|
Dow Jones Global ex-U.S.
|
0.2
|
-4.2
|
2.8
|
3.0
|
3.0
|
0.9
|
|
10-year Treasury Note (Yield Only)
|
2.9
|
NA
|
2.3
|
2.4
|
2.5
|
4.1
|
|
Gold (per ounce)
|
-1.0
|
-5.2
|
-0.8
|
3.6
|
-1.5
|
2.5
|
|
Bloomberg Commodity Index
|
-0.2
|
-5.1
|
0.0
|
-4.5
|
-8.4
|
-8.9
|
|
DJ Equity All REIT Total Return
Index
|
-1.6
|
0.6
|
3.4
|
7.4
|
7.7
|
8.0
|
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.
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.
forward looking career: Air Broker. By 2050, about 70 percent of the world’s population is
expected to live in cities, reports UNICEF.
The United States is ahead of
the curve. Since the 1990s, 75 percent or more of Americans have lived in metropolitan
areas. The same was true in Spain, the United Kingdom, Australia, and Canada. In
2000, citizens of Mexico, Korea, and Brazil were largely urban dwelling. By
2050, China and India are expected to have almost two billion people living in
cities – and neither will have crossed the 75 percent level.
If the thought of densely
packed cities inspires a bit of claustrophobia, you’re not alone. Anyone who has
ever watched ‘Green Acres’ knows city living isn’t for everyone. However, cities
are innovation engines, reports Fast
Company. “The more people there are in an area, and the more densely
they’re networked, the more startups get created and the more patents get
filed.”
Consider the entrepreneurial example
set by a New York City (NYC) deli owner who was trying to figure out how to
stay in business on the Lower East Side of Manhattan. The answer was selling
air, reports The Indicator From Planet Money:
“So when
you buy a plot of land in New York, it comes with what are called ‘air rights.’
That essentially says how much you are allowed to build on that plot of land.
Let’s say you buy a plot of land and it comes with 10 stories worth of air
rights, you could build a 10-story building on it.”
The deli owned five stories
worth of air rights, or 27,960.66 square feet of air. How much was all that air
worth? Reportedly, a developer in New York paid about $17 million for it.
Guess who negotiates air
deals in NYC.
That’s right: Air brokers.
Weekly Focus – Think About
It
“Growth is inevitable and desirable, but destruction of community
character is not. The question is not whether your part of the world is going
to change. The question is how.”
--Edward T. McMahon, Author
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
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
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.
* 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
Sources:
https://www.barrons.com/articles/stocks-at-a-standstill-as-earnings-offset-tariffs-1532131202 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/7-23-18_Barron's-Stocks_at_a_Standstill_as_Earnings_Offset_Tariffs-Footnote_3.pdf)
https://www.unicef.org/sowc2012/urbanmap/# (Place cursor over the country to find country/population
percentages.)
https://www.npr.org/sections/money/2018/07/20/630949390/the-market-for-air (Audio starts at 2:56)
Comments
Post a Comment