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Fascinatingly Counterintuitive

Fascinatingly Counterintuitive

April 01, 2019
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"Fascinatingly counterintuitive..."

That's how Michael Arone, an investment strategist, described the U.S. market environment to Avi Salzman of Barron's:

"'Stocks are rallying, but bond yields are reflecting much lower growth.' Stocks rose during the quarter because the Fed backed away from raising interest rates, and investors grew more confident that the U.S. and China would sign a trade deal, Arone said. The market was also rebounding from a very rough fourth quarter - 'conditions at the end of the year were wildly oversold,' he noted."

Through the end of last week, the Standard & Poor's 500 Index was up more than 13 percent year-to-date, despite falling corporate earnings and modest consumer spending gains.

Consumer optimism may have played a role in U.S. stock market gains. The University of Michigan's Surveys of Consumers Economist Richard Curtin reported:

"...the last time a larger proportion of households reported income gains was in 1966. Rising incomes were accompanied by lower expected year-ahead inflation rates, resulting in more favorable real income expectations...Moreover, all income groups voiced more favorable growth prospects for the overall economy...Overall, the data does not indicate an emerging recession but point toward slightly lower unit sales of vehicles and homes during the year ahead."

The Bureau of Economic Analysis released its report on economic growth in 2018 last week. Real gross domestic product (GDP), which is a measure of economic growth after inflation, was revised down to 2.2 percent in the fourth quarter of 2018. Growth was up 2.9 percent for the year, though, which was an improvement on 2017's gain of 2.2 percent.

Slowing economic growth gives weight to bond investors' expectations, while consumer optimism supports stock investors' outlook. Divergent market performance and conflicting data make it hard to know what may be ahead. One way to protect capital is to hold a well-diversified portfolio.

 

Data as of 3/29/19

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

1.2%

13.1%

7.3%

11.3%

8.7%

13.7%

Dow Jones Global ex-U.S.

-0.3

9.4

-7.1

5.8

0.5

6.7

10-year Treasury Note (Yield Only)

2.4

NA

2.7

1.8

2.7

2.7

Gold (per ounce)

-1.2

1.1

-2.2

1.9

0.1

3.4

Bloomberg Commodity Index

-0.8

5.7

-7.3

0.7

-9.6

-2.8

DJ Equity All REIT Total Return Index

1.4

17.2

20.4

8.0

10.0

19.6

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, MarketWatch, 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.

How Much Does It Cost To Make Money?

You may not have given it much thought, but it costs money to make money. In fact, the costs of the metals required to make some U.S. coins is higher than the value of the coins! George Washington and Abraham Lincoln might not approve, if they knew. Take this quiz to see what you know about the cost and value of U.S. coins.

  1. How much did it cost the U.S. Mint to make a U.S. penny in 2018?
    • 0.5 cents
    • 1.25 cents
    • 2.06 cents
    • 3.0 cents
  2. How much did it cost the U.S. Mint to make a U.S. nickel in 2018?
    • 1.25 cents
    • 4.97 cents
    • 6.03 cents
    • 7.53 cents
  3. What makes a coin valuable to a collector?
    • Metal
    • Age
    • Rarity
    • All of the above
  4. Which of these coins is the most valuable to collectors?
    • 1849 Coronet Head Gold $20 Double Eagle
    • 1913 Liberty Nickel
    • 1943-D Lincoln Wheat Cent Penny
    • 1835 Classic Head Gold $5 Half Eagle

Weekly Focus - Think About It

According to the Federal Reserve, the estimated lifespan of a $10 bill is 4.5 years. The estimated lifespans of a $5 and $1 bill are 5.5 years and 5.8 years, respectively. A $100 bill may last 15.5 years because it circulates less frequently.

Answers:

It cost 2.06 cents to make a one-cent coin that few people use. A group of citizens has been encouraging the government to retire the penny.

It cost 7.53 cents to make a nickel in 2018.

All of the above.

The 1849 Coronet Head Gold $20 Double Eagle is worth more than $16,600,000. It is one of the rarest U.S. coins.



Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Treiberg Wealth Management, a registered investment advisor and separate entity from LPL Financial.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.  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. This newsletter was prepared by PEAK. Past performance does not guarantee future results. You cannot invest directly in an index. Consult your financial professional before making any investment decision.