Womack
Weekly Commentary
July 9,
2018
The
Markets
What a rollercoaster of a quarter!
When
it comes to the American Association of
Individual Investors (AAII) Sentiment Survey, respondents tend to be more
bullish than bearish about U.S. stock markets. The survey’s historical averages
are:
·
38.5 percent bullish
·
31.0 percent
neutral
·
30.5 percent
bearish
As
the second quarter of 2018 began, investors were feeling less optimistic than
usual. (About 36.6 percent were bearish and 31.9 percent bullish.) Their
outlook was informed by a variety of factors, according to an early April
article in The New York Times, which
said:
“First
there was the risk that the economy might be growing too fast, which could
prompt central banks to hike interest rates sooner than expected. Then there
was the risk of a trade war ignited by the White House imposing tariffs on
certain products, an action that quickly prompted countries like China to erect
trade barriers of their own. Next came the threat of a government crackdown on
technology companies, after revelations of their misuse of customer data.”
As
the quarter progressed, investor optimism increased on signs of economic
strength. In early June, CNBC
reported the economy appeared to be “operating close to full employment, with
an unemployment rate at 3.8 percent, inflation still hovering at or below 2
percent, and business and consumer confidence strong.”
Robust
corporate earnings helped spur optimism, too. FactSet Insight wrote, “The S&P 500 reported earnings growth of
25 percent for the first quarter – the highest growth since Q3 2010.” In
mid-June, the AAII survey showed 44.8
percent of respondents were feeling bullish, 21.7 percent were bearish, and 33.5
percent were neutral.
As
talk of tariffs and trade wars resumed, investor optimism plummeted. By the end
of June, just 27.9 percent of respondents were bullish and more than 39 percent
reported they were feeling bearish. AAII
explained:
“Many
– but not all – individual investors anticipate continued volatility and/or
think that the current political backdrop could have a further impact on the
stock market. Trade policy is influencing some individual investors’ sentiment
as well. While many approve of the Federal Reserve’s plan to continue gradually
raising interest rates, some AAII members are concerned about the impact that
rising rates will have. Also influencing sentiment are valuations, tax cuts,
earnings growth, and economic growth.”
Despite a downturn in bullishness, major U.S. stock indices
moved higher last week.
Data as of
7/6/18
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
1.5%
|
3.2%
|
14.5%
|
10.1%
|
11.0%
|
8.2%
|
|
Dow Jones Global ex-U.S.
|
0.0
|
-4.9
|
5.6
|
3.5
|
4.0
|
0.8
|
|
10-year Treasury Note (Yield Only)
|
2.8
|
NA
|
2.4
|
2.3
|
2.6
|
3.9
|
|
Gold (per ounce)
|
0.4
|
-3.2
|
2.5
|
2.5
|
0.3
|
3.2
|
|
Bloomberg Commodity Index
|
-1.4
|
-2.2
|
4.6
|
-4.5
|
-7.5
|
-9.4
|
|
DJ Equity All REIT Total
Return Index
|
1.9
|
3.2
|
9.0
|
9.2
|
9.3
|
8.9
|
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.
there’s a carbon dioxide (CO2)
shortage. really, it’s true. Many people agree the world has too much CO2.
It’s the reason representatives from countries around the world signed the
Paris Climate Agreement. They committed to “adopt
green energy sources, cut down on climate change emissions, and limit the rise
of global temperatures,” reported National
Public Radio.
The effort has been less successful than many
had hoped, according to the International
Energy Association (IEA). After several years without increases,
energy-related emission rose by 1.4 percent in 2017. That’s the rough
equivalent of putting 170 million more cars on the road, reported Scientific American.
Emissions rose primarily in Asia, although
the European Union (EU) saw increases, too. The biggest decline was in the
United States. There’s a certain irony there, since President Trump announced
he would withdraw from the agreement in June 2017, reported The Washington Post.
Despite realizing a 1.5 percent increase in emissions,
the EU is experiencing a shortage of food-grade CO2. The Economist reported:
“Food-grade CO2 is a vital
ingredient: it puts the fizz in carbonated drinks and beer, knocks out animals
before slaughter and, as one of the gases inside packaging, delays meat and
salad from going off. A shortage of the stuff has therefore created havoc in
food makers’ supply chains.”
The EU’s food-grade CO2 is a
harvested by-product of processes for making ammonia and other chemicals,
reported The Economist. Three of
Britain’s five ammonia plants have been closed because farmers are using less
fertilizer, and CO2 does not deliver enough revenue to keep the
plants running.
Let’s hope the
shortage of CO2 doesn’t affect the supply of beverages available to
World Cup fans.
Weekly
Focus – Think About It
“My garden is an honest place. Every tree and
every vine are incapable of concealment, and tell after two or three months
exactly what sort of treatment they have had. The
sower may mistake and sow his peas crookedly; the peas make no mistake, but
come up and show his line.”
--Ralph Waldo Emerson
Best regards,
Womack
Investment Advisers, Inc.
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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.
*
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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:
http://www.aaii.com/sentimentsurvey (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-09-18_AAII_Sentiment_Survey-Results_for_Week_Ending_7-4-2018-Footnote_1.pdf)
http://www.aaii.com/sentimentsurvey/sent_results (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-09-18_AAII_Sentiment_Survey-Past_Results-Footnote_2.pdf)
https://www.economist.com/business/2018/07/05/shortages-of-carbon-dioxide-in-europe-may-get-worse (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-09-18_TheEconomist-Shortages_of_Carbon_Dioxide_in_Europe_May_Get_Worse-Footnote_10.pdf)
https://books.google.com/books?id=YvyUAwAAQBAJ&printsec=frontcover&dq=The+heart+of+emerson%27s+journals&hl=en&sa=X&ved=0ahUKEwinmq3P2IrcAhXJx4MKHcu1DcoQ6AEIKTAA#v=onepage&q=The%20heart%20of%20emerson's%20journals&f=false (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/07-09-18_Book_Excerpt-The_Heart_of_Emersons_Journals-Footnote_11.pdf)
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