Many stock markets around the world moved higher last week.
Investors’ optimism in the face of economic headwinds has confounded some in the financial services industry. Laurence Fletcher and Jennifer Ablan of Financial Times cited several money managers who believe investors have become complacent. One theory is investors’ buy-the-dip mentality has become so firmly ingrained that any price drop is seen as a buying opportunity, regardless of share price valuation.
Another theory is investors remain confident in the face of declining economic growth expectations because they expect central bankers to save the day:
“Key stock markets are hovering close to record highs even while the death count from the China-centered virus rises and travel in, out, and around the country remains heavily restricted, hurting the outlook for domestic and international companies. Regardless, stumbles in stocks are quickly reversed. To some traders, this is proof that investors believe major central banks will pump more stimulus into the financial system.”
Ben Levisohn of Barron’s doesn’t think investors in U.S. stocks are complacent. He wrote:
“Yes, [investors have] decided to stay invested in U.S. stocks, but compare it with the other options. Emerging market stocks near the epicenter of the outbreak? Treasury notes with yields of just 1.59 percent? Cash? But they haven’t sat idly by, either. They’ve dumped the stocks most exposed to coronavirus and to a slowing economy – things like energy, cruise lines, airlines, steel.”
Treasury bond markets are telling a less optimistic story than stock markets. The U.S. treasury bond yield curve has flattened in recent weeks. On Friday, 3-month treasuries were yielding 1.58 percent while 10-year treasuries yielded 1.59 percent. When there is little difference between yields for short- and long-term maturities, the yield curve is considered to be flat.
Historically, the slope of the yield curve – a line that shows yields for Treasuries of different maturities – is believed to provide insight to what may be ahead for economic growth. Normal yield curves may indicate expansion ahead, while inverted yield curves suggest recession may be looming. Flat yield curves suggest a transition is underway.
Data as of 2/14/20
Standard & Poor's 500 (Domestic Stocks)
Dow Jones Global ex-U.S.
10-year Treasury Note (Yield Only)
Gold (per ounce)
Bloomberg Commodity Index
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; 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.
What’s your favorite remedy for a Hangover? Consuming too much alcohol comes with an unwelcome side effect: the hangover. Symptoms of a hangover typically include dehydration, fatigue, vertigo, headache, nausea, and muscle aches. If you’ve ever had one you may understand the growing market for hangover treatments.
By one estimate, Americans experience 2.6 billion hangovers each year. That may be why market research analysts think hangover remedies have the potential to become a billion-dollar industry. The Washington Post reported the number of recovery (and ‘precovery’) treatments has ballooned during the past three years. So far, the hangover remedy industry has:
- Offered treatments that include water-soluble tablets, capsules, beverages, and patches.
- Attracted $10 million of Silicon Valley venture capital.
- Birthed start-ups that generate strong sales during the first few months of operations.
The hangover market is small potatoes when compared to the market for alcoholic beverages ($1.4 trillion). However, the market for non-alcoholic cocktails is growing, too. In New York City, booze-free bars charge $13 a pop for dry cocktails.
Here’s a question: Are alcohol-free drinks a precovery hangover solution or a beverage?
Weekly Focus – Think About It
“A hangover is the wrath of grapes.”
--Dorothy Parker, American poet
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.