Market Swoon 4/24/17

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Weekly Market Commentary

April 24, 2017

The Markets

Last week, investors multi-tasked, pushing both U.S. bond and stock markets higher.

In March, the Federal Reserve raised the Fed funds rates for the second time in three months. Typically, we would expect interest rates to rise and bond prices to fall, but interest rates have been falling and bond prices have been moving higher. Barron's reported yields on 10-year Treasuries hit their lowest levels since the election last week. 

Reuters explained there has been a shift in expectations:

"Bonds prices have been boosted in recent weeks by reduced expectations that the Federal Reserve will raise interest rates two more times this year, following disappointing economic data releases. Still, Fed Vice Chair Stanley Fischer said on Friday that two more U.S. rate increases this year remain an appropriate plan for the Federal Reserve despite some weak recent economic data."

Geopolitical anxiety continued to play a role in market performance, too, causing investors to flee to safe havens, which contributed to bond market strength.

Geopolitics didn't cause U.S. stock markets to swoon, though. Barron's reported:

"Stocks' on-again, off-again rally was on again last week, and it took the Standard & Poor's 500 index to within sniffing distance of its March 1 record. Climbing in the face of geopolitical anxiety from Paris to Pyongyang is bullish, as is preserving the upward slope of the index's 200-day average. But there are signs of wavering conviction..."

That wavering conviction is found in investors' preference for a small group of tech stocks, as well as more defensive sectors of the market. Through mid-April, just 10 stocks accounted for one-half of the S&P 500's gain during 2017.

A possible motto for 2017: Expect the unexpected.

Mobile Technology: The Next Generation

Faster and more efficient mobile phones are on the horizon. That's right, 5G is almost here, according to Network World.

If you were never quite sure what distinguished 1G from 2G, or 3G from 4G, much less 4G from 5G, the answer depends on whom you ask (or in this case, what you read). PC Magazine explained the technology:

"1G was analog cellular. 2G technologies, such as CDMA, GSM, and TDMA, were the first generation of digital cellular technologies. 3G technologies, such as EVDO, HSPA, and UMTS, brought speeds from 200kbps to a few megabits per second. 4G technologies, such as WiMAX and LTE, were the next incompatible leap forward, and they are now scaling up to hundreds of megabits and even gigabit-level speeds."

The Economist, on the other hand, explained the benefits to users: speed of communication. 5G is different from earlier generations of wireless broadband because it can:

"...send and receive signals almost instantaneously. The "latency" (i.e., the lag between initiating an action and getting a response) that has hobbled mobile phones will be a thing of the past. When 3G phones were the bee's knees, the time taken for two wireless devices to communicate with one another was around 500 milliseconds. That half-second lag could make conversation frustrating. A decade later, 4G had cut the latency to 60 milliseconds or so - not bad, but still an age when waiting for crucial, time-sensitive data, especially from the cloud."

5G mobile networks may be up and running by the time the South Korean Winter Olympics roll around in 2018, according to The Economist.

Weekly Focus - Think About It 

"Try putting your iPhones down every once in a while, and look at people's faces."

--Amy Poehler, Comedian

Volatility's Quiet Trading 4/17/17

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Weekly Market Commentary

April 17, 2017

The Market

And the survey said...

In late 2016, Natixis Global surveyed 500 institutional decision makers representing corporate pension plans, public pension plans, sovereign wealth funds, insurance companies, foundations, and endowments. Survey participants said market volatility, geopolitics, and interest rates were their top risk concerns for 2017.

So far, U.S. stock markets haven't proven to be very volatile, but geopolitics caused some disruption last week. Barron's reported:

"Stocks fell 1 percent last week in quiet trading, with many market participants out for religious observances. Worries about the war in Syria, North Korean saber-rattling, and the coming French elections had investors reining in riskier positions and heading for safe havens.

Real estate, utilities, and consumer-staples stocks were the only sectors that rose last week. Financials - and banks in particular - fell, despite strong earnings reports from the industry's big kahunas."

It was a tough week for stocks, but investors' flight to safety caused Treasury bonds to rally. Reuters reported the interest rate on 10-year Treasury notes fell 14 basis points. That's the biggest weekly decline since January 2016. (There is an inverse relationship between bond interest rates and bond prices. When interest rates fall, bond prices rise, and vice-versa.)

Why do shoelaces come untied?

Engineers have solved many knotty problems, but it wasn't until recently they unraveled the mystery of shoelaces and why they come undone, reported The Economist.

If you don't wear shoes that lace or spend time with young child who wear lace-ups, you may not have realized how vexing shoelaces can be. Traditional shoelace bows are comprised of a reef knot and a slipknot - a combination that has come undone throughout history. People have explored alternative knots. In fact, there is an entire website devoted to shoelace knots. It details regular, secure, and special purpose options.

As it turns out, the problem with shoelaces is walking. A group of engineers at the University of California, Berkeley worked out the mechanics of shoelace-bow destruction using treadmills, cameras, and tiny accelerometers. The Economist reported:

"The first thing which happens during walking is that the reef itself is loosened by the inertial forces of the lace ends pulling on it. This occurs as a walker's foot moves first forward and then backward as it hits the ground during a stride. Immediately after that, the shock of impact distorts the reef still further. The combination of pull and distortion loosens the reef's grip on the lace, permitting it to slip...Probably, nothing can be done about this differential elongation. But it might be possible to use the insights [researchers] have provided to create laces that restrict the distortion of the reef at a bow's center and, thus, slow the whole process down."

Could this research win an Ig Nobel in 2017? It's possible.

You may recall from previous commentaries, the 'Igs' celebrate improbable research and "...honor achievements that first make people laugh, and then make them think. The prizes are intended to celebrate the unusual, honor the imaginative - and spur people's interest in science, medicine, and technology."

The 27th First Annual Ig Nobel Prize ceremony will take place September 14, 2017.

Weekly Focus - Think About It 

"I put a dollar in one of those change machines. Nothing changed."

--George Carlin, Comedian

* Securities offered through LPL Financial Member FINRA/SIPC.

* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer. 

* 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.

* The Standard & Poor's 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* 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 London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ 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 TR 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.

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

*This newsletter was prepared by Peak Advisor Alliance

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Stock investing involves risk including loss of principal.

* This information in not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

* The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basked of consumer goods and services.

* Harmonized Indexes of Consumer Prices are measures of consumer price inflation that have been standardized across multiple countries based on European Union definitions. A monthly report compiles HICP trends for 16 economies, alongside conventional Consumer Price Indexes (CPI) as measured by national governments.

  

* To unsubscribe from the Weekly Market Commentary please write to us at 60 Four Mile Drive, Suite 9, Kalispell, MT 59901.

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Sources:

Alternative Uses: Costco Connection Magazine, April 2017

Market

https://ngam.natixis.com/cs/us/Render.jsp?did=1250236377948

http://www.barrons.com/articles/stocks-slip-1-on-week-as-geopolitical-worries-grow-1492229480?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-17-17_Barrons-Stocks_Slip_1_Percent_on_Week_as_Geopolitical_Worries_Grow-Footnote_2.pdf)

http://www.reuters.com/article/us-global-markets-idUSKBN17F03U

http://www.investopedia.com/ask/answers/04/031904.asp

http://www.economist.com/news/science-and-technology/21720610-three-californian-engineers-have-found-out-answer-knotty-problem-how (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-17-17_TheEconomist-How_Shoelaces_Come_Undone-Footnote_5.pdf)

https://www.fieggen.com/shoelace/knots.htm

http://www.improbable.com/ig/

http://itsamoneything.com/money/quote-change-machine-changed-george-carlin/#.WPOFPRiZO7o

Mixed Signals 4/10/17

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April 10, 2017

The Markets

U.S. stock markets are sending mixed signals.

If you look at the performance of the CBOE Volatility Index (a.k.a. the VIX or fear gauge), which is a measure of market expectations for volatility in the near future, it appears all is well and investors expect no unexpected events. Barron's explained:

"...which brings us back to a central fact: the absence of volatility. The first quarter was historic for the CBOE Volatility Index...It ranged from 10.6 to 13.1, and its average level was 11.69, the lowest in an initial quarter since the VIX was born in 1990 and the second-lowest quarterly average since the 11.3 of 2006's final three months..."

The VIX remained stubbornly low last week, too, despite weaker than expected employment news, wage news, and generally flat economic data.

If you turn your eyes to the number of companies whose shares have reached new highs, you might form a different opinion about the steadiness of stock markets. Barron's wrote:

"...the squadron of stocks pushing 52-week highs at the New York Stock Exchange has shrunk from 338 on March 1 to 72 late last week...But, if the planet really is enjoying a synchronized economic recovery, why are we lunging at these stocks as if they were the only game in town?"

It's difficult to know how to factor in last week's air strikes against Syria, which registered as a tiny blip on the U.S. stock market radar. Some analysts say that's as it should be. The real drivers of market performance in 2017 will be tax reform and global monetary policy. Others are concerned involvement in Syria could lead to a reshuffling of political priorities and delay progress on domestic legislation.

In times like these, diversification is critical.

Pulling Ink Out of the Air

Air pollution is one of the biggest environmental and human health threats in the world, according to a 2016 World Health Organization report:

"To date, air pollution - both ambient (outdoor) and household (indoor) - is the biggest environmental risk to health, carrying responsibility for about one in every nine deaths annually. Ambient (outdoor) air pollution alone kills around 3 million people each year...Air pollution continues to rise at an alarming rate and affects economies and people's quality of life; it is a public health emergency."

Engineer Anirudh Sharma was familiar with the problem. The MIT Media Lab student was walking down a street in Mumbai, reported MSN.com, when he noticed that diesel exhaust from passing buses and cars was staining his clothes black.

The experience sparked an idea: Was it possible to recycle air pollution and use it to make something useful? Like ink?

During the past few years, Sharma has developed technology to create the world's first line of art supplies derived from air pollution. He and his team have built an exhaust filter that captures carbon soot as it is emitted from cars, generators, and ferries. Once pollution has been gathered, impurities are removed. The remaining soot is ground into pigment and mixed with vegetable oil to create inks, markers, and paints.

One artist commented, "I don't know if it's the pollution, but the quality of the ink is really special...It's pitch black, really thick and dries incredibly quickly."

Last month, the first Clean Air Gallery opened in London. It features work by artists from London, Glasgow, Leeds, Southampton, and Nottingham - some of the most polluted cities in the United Kingdom - using Sharma's ink. Other exhibitions are expected to open in Berlin, Singapore, and New York.

Weekly Focus - Think About It 

"A mind which really lays hold of a subject is not easily detached from it."

--Ida Tarbell, Investigative journalism pioneer

* Securities offered through LPL Financial Member FINRA/SIPC.

* These views are those of Peak Advisor Alliance, and not the presenting Representative or the Representative's Broker/Dealer, and should not be construed as investment advice.

* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance 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 indices 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.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

  

* To unsubscribe from the Weekly Market Commentary please write to us at 60 Four Mile Drive, Suite 9, Kalispell, MT 59901.

* To unsubscribe from the Weekly Market Commentary

 please reply to this e-mail with   "Unsubscribe" in the subject line, or write us at

60 Four Mile Drive, Suite 9, Kalispell, MT 59901  

Sources:

Who is Your Beneficiary?: http://www.investopedia.com/articles/retirement/04/080404.asp

Market:

http://www.cboe.com/micro/vix/pdf/cboe30c7-volindex_qrg.pdf

http://www.barrons.com/articles/low-vix-may-mask-stock-risks-1491625249?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-10-17_Barrons-Low_VIX_may_Mask_Stock_Risks-Footnote_2.pdf)

http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html 

(click on U.S. & Intl Recaps and select "The job madness of March") (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-10-17_Barrons-The_Job_Madness_of_March-Footnote_3.pdf)

http://www.barrons.com/articles/are-stocks-finally-topping-out-1491627050?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-10-17_Barrons-Are_Stocks_Finally_Topping_Out-Footnote_4.pdf)

http://www.barrons.com/articles/do-airstrikes-signal-new-priorities-for-trump-1491627084?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-10-17_Barrons-Do_Airstrikes_Signal_New_Priorities_for_Trump-Footnote_5.pdf)

http://apps.who.int/iris/bitstream/10665/250141/1/9789241511353-eng.pdf?ua=1 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-10-17_WorldHealthOrganization-Report-Ambient_Air_Pollution-Footnote_6.pdf)

https://www.msn.com/en-ca/news/offbeat/magic-black-air-ink-the-art-supplies-made-from-vehicle-pollution/ar-BBzuyky

https://press.economist.com/stories/10701-the-worlds-first-clean-air-gallery-opens-in-london

http://www.famousquotesandauthors.com/authors/ida_tarbell_quotes.html

Happy Birthday Bull Market! 4/4/17

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April 3, 2017

The Markets

Happy birthday!

Toward the end of the first quarter, the bull market celebrated its eighth birthday. David Kelly, Chief Global Strategist at J.P. Morgan Asset Management wrote:

"Eight years ago, on March 9, 2009, the S&P 500 closed at 677, down 57 percent from where it had been just 18 months earlier. 10-year Treasury yields had fallen from 3.6 percent to 2.9 percent over the previous year...Investors were depressed and scared. However, good long-term returns from stocks were almost inevitable at that point since economic and market fundamentals were at unsustainably low levels...Eight years later, the financial landscape has changed completely...it still makes sense to be in long-term investments including both domestic stocks and bonds. However, it is time to adopt a more diversified and thoughtful approach that recognizes the importance of valuations..."

Valuations were heady during first quarter

Stock valuations reflect how much a share of a company's stock, or shares of companies in an index, may be worth. Valuations can help investors understand whether shares are expensive, reasonable, or inexpensive. One way to measure valuation is to look at trailing 12-month price-to-earnings (P/E). This gauge reflects how much an investor must pay to receive one dollar of the company's earnings.

For instance, on March 31, FactSet reported the trailing 12-month P/E of the Standard & Poor's 500 Index was 21.8. That's well above the 10-year average of 16.6 and the five-year average of 17.1. This suggests shares of the overall index are expensive. Keep in mind, even when the index appears to be expensive, the valuations of specific companies or sectors within the index may still be attractive.

Animal spirits abounded

The CEO of JPMorgan attributed investors' enthusiasm for stocks during the first quarter to 'animal spirits,' reported CNN Money. Animal spirits is a term coined by John Maynard Keynes. It describes "...a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities." Investors were inspired by the new administration's growth agenda, including promises of lower taxes and less regulation.

The U.S. economy grew (but we're not sure how much)

People and businesses may have been more enthusiastic than data suggests they should be. Financial Times cited research from Morgan Stanley that shows a growing gap between 'hard' economic data (like slowing corporate spending and lower retail sales) and 'soft' economic data (like consumer and business optimism). The disparity has created uncertainty about the pace of economic growth during the first quarter of 2017. "The Atlanta Federal Reserve's model, which...focuses on hard data, projects an annualized rate of just 1 percent. However, the New York Fed's model, which 'incorporates soft data into its tracking,' forecasts 3 percent growth."

The Federal Reserve acted

With employment and inflation data approaching Fed targets, the Federal Open Market Committee raised rates in March, pushing the Fed funds target rate into the 0.75 percent to 1 percent range, reported Financial Times. More rate hikes are expected during 2017.

Brexit was launched

The end of the first quarter of 2017 marked a new beginning for Britain. On March 29, Prime Minister Theresa May officially launched Britain's exit from the European Union. The United Kingdom now has two years to negotiate terms with the European Union (unless all members of the EU unanimously approve an extension).

When you consider how long trade agreement negotiations normally take, it appears the task ahead for Britain and the EU is akin to running a marathon in 30 minutes. For example, Canada and the EU began discussing a trade agreement in 2007. It has yet to be finalized.

United States and European national stock market indices finished the quarter higher.

The Tooth Fairy is Awfully Generous These Days.

Since 1998, an insurance firm has conducted a poll to determine how much swag the tooth fairy or, depending on your country, the magical mouse, elf, brownie, or tooth rat has been leaving behind for children who've lost their teeth.

When the poll began, the going rate for a tooth was about $1.50. The most recent survey found that, in the United States, a tooth was pulling in about $4.66! The going rate in other nations was similar:

* C$6.11 in Canada ($4.59 U.S.)

* ¥525.82 in Japan ($4.72 U.S.)

* €4.38 in Ireland and Spain ($4.67 U.S.)

* £3.75 in England ($4.70 U.S.)

* R$14.47 in Brazil ($4.63 U.S.)

* C2613.42 in Costa Rica ($4.66 U.S.)

NPR's Planet Money examined whether the value of lost teeth has kept pace with inflation. They posited a tooth was worth about $0.50 in the 1970s. If the value of a tooth had risen with inflation, it would be worth less than $3.00 today. So, the value of a lost tooth has increased faster than the rate of inflation - similar to college tuition!

Weekly Focus - Think About It 

"But the real magic and the secret source behind collaborative consumption marketplaces...isn't the inventory or the money. It's using the power of technology to build trust between strangers...Because, at its core, it's about empowerment. It's about empowering people to make meaningful connections, connections that are enabling us to rediscover a humanness that we've lost somewhere along the way..."

--Rachel Botsman, Business consultant