A Weekly Perspective on Markets
As the “dog days” of summer drag on, trading continues to be relatively light. Oil prices fell at the beginning of last week amid rumors that Iraq may up its oil exports, prompting stocks to retreat. While stocks rallied midweek, they sunk by the close of trading last Friday following Federal Reserve Chair Janet Yellen’s intimation that short-term interest rates could be in line for an increase sooner rather than later. Of the domestic market indexes, only the smaller companies in the Russell 2000 didn’t lose ground. The larger companies found in the Dow, S&P 500, and Nasdaq suffered their largest losses since the week of the Brexit vote in June.
The U.S. bond market responded to Yellen’s comments with a flattening of the yield curve. When the bond yield curve is flat, short-term and long-term bonds of similar credit quality offer investors almost the same rates. Barron’s explained: “A flattening yield curve can indicate economic weakness. It signals investors expect inflation (and interest rates) to stay low for a long time.”
Overseas, retail sales picked up in the UK in July as the weak pound (a result of the fallout from Brexit) may be attracting foreign consumers. China’s economic growth has clearly slowed as industrial production and retail sales weakened.
The price of crude oil (WTI) closed at $47.33 a barrel last week, down from $48.57 per barrel the previous week. The price of gold (COMEX) fell, closing at $1,325.00 by late Friday afternoon, down from the prior week’s price of $1,345.80. The national average retail regular gasoline price increased for the first time in the last 10 weeks to $2.193 per gallon on August 22, $0.044 higher than the prior week’s price but $0.444 below a year ago.
Last weeks market action was an example of Shakespeare’s “Tale told by an idiot, full of Sound and Fury… signifying nothing.” The commodity cycle is still intact. Yellen will eventually be raising rates. The media will continue to be catastrophists. And markets will ever be reactive to the noise.
* 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.
* 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 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.
* This newsletter was prepared by Peak Advisor Alliance of which DeYoe Wealth Management is a Member, and should not be construed as investment advice.
* 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.
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