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Weekly Market Commentary (May 16, 2016)

When is a door not a door?

The answer, of course, is: When it’s ajar.

Investors and analysts were trying to find the answer to a different riddle last week: When are strong retail sales not strong retail sales?

The answer is: When the retailers are department stores.

Consumers spent more in April than they have in more than a year. Commerce Department data showed April’s retail sales improved by 1.3 percent month-to-month and 3.0 percent year-to-year. Yet, several large department stores reported poor first quarter earnings and weren’t optimistic about the future, according to Barron’s.

The Wall Street Journal pointed out Internet and mobile app purchasing increased by 2.4 percent in April and was up 10.2 percent for the past 12 months, while purchases made in department stores fell by 1.7 percent for the last 12 months. The Journal said there is no easy explanation for lagging department store sales:

“Executives at traditional large retailers struggled to explain the slump, which for some companies was their worst since the recession. Some pointed to a decrease in mall traffic, while others said shoppers were spending more on items their stores don’t sell such as entertainment, travel, and food.”

The Journal also said strong consumer spending focused some economists’ attention on the Federal Reserve and the likelihood it will take actions intended to increase interest rates in mid-June. However, CNBC reported the probability of a rate increase in June remained low.


Data as of 5/13/16

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

-0.5%

0.1%

-2.5%

7.8%

8.9%

4.7%

Dow Jones Global ex-U.S.

-0.6

-2.6

-16.1

-3.2

-2.0

-0.9

10-year Treasury Note (Yield Only)

1.7

NA

2.3

1.9

3.2

5.2

Gold (per ounce)

-1.8

19.2

4.6

-4.0

-3.4

6.3

Bloomberg Commodity Index

1.3

7.5

-19.5

-13.9

-12.0

-7.3

DJ Equity All REIT Total Return Index

-1.3

7.2

12.6

7.6

11.2

7.1

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.

which country has the world’s fastest growing economy? We all know China’s growth is slowing. Last week, China's Vice-Premier Zhang Gaoli indicated the country is on pace to match its growth target of 6.5 percent to 7.0 percent for 2016. As we’ve mentioned before, the Conference Board believes Chinese government growth numbers are inflated. It estimates China’s true growth rate at 3.7 percent for 2016, which is unchanged from 2015. That’s still a lot faster than the 2.0 percent growth projected for the world’s advanced economies by the World Economic Forum (WEF).

Advanced countries may be lagging, but there are countries in the world with economies that are growing apace. According to the WEF, countries that will deliver the strongest economic growth during 2016 include:

·         Myanmar (8.6 percent)

·         Ivory Coast (8.5 percent)

·         Bhutan (8.4 percent)

·         India (7.5 percent)

·         Laos (7.4 percent)

·         Iraq (7.2 percent)

·         Cambodia (7.0 percent)

·         Tanzania (6.9 percent)

·         Bangladesh (6.6 percent)

·         Senegal (6.6 percent)

These projections reflect gross domestic product growth, which is the total of all goods and services produced in a nation, and offer little insight to issues such as well-being and quality of life.

Weekly Focus – Think About It

“I hope it is true that a man can die and yet not only live in others but give them life, and not only life, but that great consciousness of life.”

--Jack Kerouac, American novelist

 

* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.  These risks are often heightened for investments in emerging markets. * 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. * 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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Weekly Market Commentary

Reading economic portents can be tricky.

For example, do signs that economic growth is slowing – like last week’s employment report, which was anemic relative to consensus forecasts, and first quarter’s gross domestic product (GDP) growth – mean the economy is headed for trouble? Or, does it mean the economy is going to continue to grow slowly?

It all depends on whom you ask.

Some see current lackluster economic data as a harbinger of trouble. Last week, Barron’s cited an expert who was concerned about employment data. “…It could be a sign of trouble...Specifically, falling profit margins will put pressure to trim costs and head counts later this year and into 2017, which would slow consumer-spending growth.”

Others believe the United States is destined to experience a persistent period of slow growth. In 2013, Barron’s suggested the enviable pace of growth in the United States since World War II was likely to decline, along with the size of its working-age population and gains in worker productivity. The new era:

“…could have broad repercussions that will affect not only the pugilists in Washington but businesses and investors. Weaker growth will make it harder for companies to improve earnings, fatten dividends, or garner better stock returns. It also threatens to fan social inequality and class tensions and limit the ability of government to fund various entitlement programs like Medicare and Social Security. Tax revenues also are likely to fall short of projected levels.”

Of course, a lot depends on how you gauge growth. A 2009 discussion in a Harvard Business School blog asked whether slower growth, as measured by current indicators, was meaningful since, as this commentary mentioned last week, gross domestic product (GDP) is a flawed indicator. “Further, in an age of concern about the environment, questions are raised about whether certain forms of growth – let alone incorrect measures – serve a very good purpose.”

Investors expressed their opinions last week. They weren’t thrilled by mixed economic data or the possibility of slower growth. Reuters suggested markets’ downward shift indicated a reduced appetite for risk.


Data as of 5/6/16

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

-0.4%

0.7%

-1.5%

8.3%

9.0%

4.5%

Dow Jones Global ex-U.S.

-3.7

-2.1

-14.6

-2.9

-2.3

-1.2

10-year Treasury Note (Yield Only)

1.8

NA

2.3

1.8

3.2

5.1

Gold (per ounce)

0.3

21.4

7.9

-3.7

-2.8

6.7

Bloomberg Commodity Index

-2.5

6.2

-20.3

-14.4

-12.2

-7.3

DJ Equity All REIT Total Return Index

4.3

8.6

15.0

8.3

11.5

7.0

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.

it probably won’t surprise you to learn russia was on top. In countries around the world, crony capitalism has thrived during the past two decades. The net worth of wealthy business folk, who worked closely with their governments, was almost $2 trillion in 2014, an increase of about 385 percent from 2004. That is about one-third of the total wealth of billionaires around the world.

The National Review defined crony capitalism as “…an insidious system in which businesses’ success is based on a close relationship with government and, specifically, with the people in power who dispense favors, subsidies, bailouts, and other forms of special treatment.”

The Economist offered some specific examples. “As commodity and property prices soared, so did the value of permits to dig mines in China or build offices in São Paulo. Telecoms spectrum doled out by Indian officials created instant billionaires. Implicit state guarantees let casino banking thrive on Wall Street and beyond.”

In an effort to measure the influence of crony capitalism on wealth, The Economist developed an index. The publication took Forbes’ annual lists of the world’s billionaires, designated each billionaire as crony or not-crony (as determined by the industry in which he or she had accumulated wealth), sorted them by country, and then calculated wealth as a percent of their country’s gross domestic product (GDP).

Russia, Malaysia, Philippines, Singapore, and Ukraine topped the 22-country index in 2016. Germany, Poland, South Korea, Japan, and France were at the bottom. The United States was 15th on the list. U.S. billionaires’ wealth is equivalent to about 13 percent of GDP, but wealth earned through crony capitalism accounts for just 2 percent of that amount.

Weekly Focus – Think About It

“The price of success is hard work, dedication to the job at hand, and the determination that whether we win or lose, we have applied the best of ourselves to the task at hand.”

--Vince Lombardi, Past Coach of the Green Bay Packers

 

* 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. * 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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Weekly Market Commentary (May 2, 2016)

“Which would you prefer to be: a medieval monarch or a modern office-worker?” If you immediately answered medieval monarch, take a moment to ponder life without “…modern dentistry, antibiotics, air travel, smartphones, and YouTube.”

Last week, The Economist used this example to illustrate the challenges of accurately measuring living standards over time. For many years, countries and economists have relied on gross domestic product (GDP), the value of all goods and services produced by a country over a specific period of time, to gauge relative prosperity. The publication pointed out GDP may not be an accurate measure of well-being because it does not account for changes in quality of output:

“…The benefits of sanitation, better health care, and the comforts of heating or air-conditioning meant that GDP growth almost certainly understated the true advance in living standards in the decades after the Second World War. But at least the direction of travel was the same. GDP grew rapidly; so did quality of life. Now GDP is still growing (albeit more slowly), but living standards are thought to be stuck.Part of the problem is widening inequality: median household income in America, adjusted for inflation, has barely budged for 25 years. But increasingly, too, the things that people hold dear are not being captured by the main yardstick of value.”

Whether it accurately reflects growth in the United States or not, U.S. GDP gained 0.5 percent during the first quarter of 2016. Barron’s reported investors were not encouraged by the less-than-robust growth rate or by the fact GDP growth in the Eurozone (0.6 percent) exceeded GDP growth in the United States during first quarter.

Weak corporate earnings also influenced market performance last week. So far, 62 percent of companies in the Standard & Poor’s 500 Index have reported their results, and the numbers show first quarter earnings have declined by 7.6 percent, year-over-year. That is better than expected, according to FactSet, but nothing to write home about.


Data as of 4/29/16

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

-1.3%

1.1%

-2.0%

9.0%

8.7%

4.7%

Dow Jones Global ex-U.S.

0.1

1.7

-12.4

-1.3

-2.1

-0.6

10-year Treasury Note (Yield Only)

1.8

NA

2.0

1.7

3.3

5.1

Gold (per ounce)

3.4

21.0

6.3

-4.3

-3.5

6.9

Bloomberg Commodity Index

3.0

8.9

-17.0

-14.0

-13.4

-7.1

DJ Equity All REIT Total Return Index

-0.1

4.2

7.1

7.4

10.0

6.9

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.

when someone says, “federal budget,” do your eyes glaze over? Apparently, enough folks tune out when the budget is mentioned that the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution developed a digital game to make the matter more palatable. ‘The Fiscal Ship’ gives players a chance to choose tax and spending policies for the United States and see how those choices affect the country.

These dollars-and-cents decisions aren’t simple. The actions taken increase or reduce the country’s debt and also help determine the kind of nation we’ll be living in three decades from now. The game’s description explains:

“America is looking at a permanent, growing mismatch between revenues and spending, and policymakers are faced with difficult decisions about how to reconcile important government priorities…with the tax revenues that the current tax code will yield…So your mission is to pick from a menu of tax and spending options to reduce the debt from projected levels over the next 25 years. Small changes to spending and taxes won’t suffice. The choices are difficult, but the goal is achievable…To win the game, you need to find a combination of policies that match your values and priorities AND set the budget on a sustainable course.”

Before you select policies, you’ll be asked to choose the issues that are most important to you, such as: Shrink Government, Strengthen the Social Safety Net, Invest in the Future, Strengthen National Defense, and others.

Once you’ve prioritized the issues, you’ll be given a laundry list of policy choices. That’s when the tough decisions get made. As you develop your plan, you’ll be shown how the decisions you’re making affect revenue, spending, and the nation’s debt as well as issues that are important to you.

You can find the game at http://www.fiscalship.org.

Weekly Focus – Think About It

“I suppose there's a melancholy tone at the back of the American mind, a sense of something lost. And it's the lost world of Thomas Jefferson. It is the lost sense of innocence that we could live with a very minimal state, with a vast sense of space in which to work out freedom.”

--George Will, American newspaper columnist

 

* 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. * 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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Weekly Commentary (April 25, 2016)

U.S. stock markets finished last week in heady territory.

The Dow Jones Industrial Average closed at 18,003. Its all-time closing high is 18,312. The Standard & Poor’s 500 Index was less than 1 percent below its intraday trading record, which was set last year.

Despite strong stock market performance, optimism was in short supply.

Barron’s latest Big Money poll showed money managers are less bullish than they were last fall. Just 38 percent were bullish or very bullish about the prospects for stocks in coming months, 46 percent were neutral, and 16 percent were bearish. Their outlook varied by market. Overall, they were most enthusiastic about the United States, European, and emerging markets:

·         U.S. stocks: 72 percent bullish / 28 percent bearish

·         European stocks: 66 percent bullish / 34 percent bearish

·         Emerging markets stocks: 53 percent bullish / 47 percent bearish

·         Japanese stocks: 30 percent bullish / 70 percent bearish

·         Chinese stocks: 29 percent bullish / 71 percent bearish

The American Association of Individual Investors’ Sentiment Survey reported, when compared to money managers, investors are less neutral (43 percent) and more bearish (24 percent) a­bout what may happen during the next six months.

Current levels of pessimism might have inspired Sir John Templeton, a renowned contrarian investor. He once said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”


Data as of 4/22/16

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

0.5%

2.3%

-0.8%

10.2%

9.4%

4.8%

Dow Jones Global ex-U.S.

1.0

1.7

-11.8

-0.3

-1.8

-0.5

10-year Treasury Note (Yield Only)

1.9

NA

2.0

1.7

3.4

5.0

Gold (per ounce)

1.3

17.0

4.5

-4.4

-3.7

7.2

Bloomberg Commodity Index

3.3

5.7

-17.5

-14.1

-13.8

-7.3

DJ Equity All REIT Total Return Index

-1.7

4.2

5.1

7.8

10.6

6.7

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.

on average, Americans spend 91 percent of their time indoors or in a vehicle. Just 7 to 8 percent of their time is spent outside. These were the findings of The National Human Activity Pattern Survey (NHAPS) which measures variation in human exposure to pollutants.

The findings do not bode well for Americans’ health because levels of pollution indoors are a lot higher than those outside and can cause serious health issues. They also are notable because researchers believe being outside has positive health effects:

“Research published in the Journal of Aging Health shows that getting outside on a daily basis may help older people stay healthy and functioning longer. Participants in the study who spent time outdoors every day at age 70 showed fewer complaints of aching bones or sleep problems, among other health-related problems, at age 77 than those who did not head outside each day.”

Being outside is thought to have benefits for people of all ages. These may include:

·         Greater optimism

·         Enhanced mental health

·         Improved attention spans

·         Stronger immune systems

Rearranging time budgets to include more outdoor activities could improve financial outcomes, too, since healthcare costs are a concern for many families, and these costs often increase as people age. The Bureau of Labor Statistics reported, on average, Americans spent about $53,500 in 2014. Almost $4,300 – about 8 percent – was spent on healthcare.

Weekly Focus – Think About It

“Everybody needs beauty as well as bread, places to play in and pray in, where nature may heal and give strength to body and soul.”

--John Muir, American environmentalist and author

 

* 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. * 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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Weekly Market Commentary

Isn’t it remarkable that China’s growth is so consistent?

A columnist from The Washington Post once opined that China “produces an astonishing number of astonishing numbers.” Last week’s GDP announcement, which helped push markets higher, may fall into that category.

China’s official statistics agency reported the country’s gross domestic product (GDP) grew by 6.7 percent during the first quarter of 2016. That didn’t come as a big surprise because it’s smack-dab-in-the-middle of the official Chinese government target of 6.5 to 7.0 percent GDP growth. The target was set last year when the government adopted its most recent five-year plan.

Not everyone thinks China’s official statistics are on the money. The Conference Board (TCB), an independent global research association, has found:

“…an upward bias in the previously published GDP growth series of, on average, 2.6 percentage points per year since the start of Deng Xiaoping’s so-called “reform era” that began in 1978, this percentage has not been constant over time. In fact, our alternative series indicates much larger volatility in the year-on-year estimates (sometimes even showing faster growth rates than the official estimates), suggesting that the impacts of external and internal shocks on the Chinese economy are much more pronounced than the official statistics convey.”

 

In other words, China’s growth may not be as steadfast and unwavering as the country’s government would have us believe.

TCB estimated China’s GDP grew by 3.7 percent during 2015, which was significantly lower than the Chinese government’s 6.9 percent growth estimate. In fact, TCB expects the Chinese economy to grow by 3.7 percent in 2016, too. It’s not 6.5 percent, but it’s solid growth.


Data as of 4/15/16

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

1.6%

1.8%

-1.2%

10.3%

9.5%

4.9%

Dow Jones Global ex-U.S.

3.3

0.7

-13.0

-0.6

-1.6

-0.3

10-year Treasury Note (Yield Only)

1.8

NA

1.9

1.7

3.4

5.0

Gold (per ounce)

-1.0

15.5

2.9

-4.2

-3.6

7.2

Bloomberg Commodity Index

1.7

2.3

-20.8

-14.8

-14.0

-7.4

DJ Equity All REIT Total Return Index

0.2

6.0

7.2

9.1

11.4

7.2

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.

what do economists think? As they’ve traveled across the country, U.S. Presidential candidates have made a variety of economic proposals and promises. National Public Radio’s Planet Money asked 22 economists from across the political spectrum for their two cents on the matter. Survey participants were given three options: good, debatable, or bad. Here are their opinions:

1.      End the “carried interest” tax break, which benefits hedge fund managers and private equity executives.

·         Good: 20

·         Debatable: 2

·         Bad: 0

2.      Lower the corporate tax rate to 25 percent.

·         Good: 10

·         Debatable: 10

·         Bad: 2 

3.      Create a “National Infrastructure Bank” seeded with public money to help finance infrastructure projects.

·         Good: 10

·         Debatable: 8

·         Bad: 4

4.      Make tuition free at public colleges and universities.

·         Good: 1

·         Debatable: 1

·         Bad: 20

5.      Make tuition free at community colleges for students who contribute earnings from working 10 hours a week.

a.       Good: 5

b.      Debatable: 9

c.       Bad: 8

6.      Impose a “spectator tax.” Stock trades will be taxed at 0.5 percent and bonds at 0.1 percent.

a.       Good: 4

b.      Debatable: 6

c.       Bad: 12

7.      Raise the federal minimum wage to $15 an hour.

a.       Good: 2

b.      Debatable: 4

c.       Bad: 16

8.      Remove single taxpayers who earn less than $25,000, and married taxpayers (and those filing jointly) who earn less than $50,000 – approximately over 50 percent – from the tax rolls.

a.       Good: 2

b.      Debatable: 9

c.       Bad: 11

9.      Everyone pays the same 10 percent tax rate. It retains some version of the earned income tax credit and deductions for lower-income families.

·         Good: 1

·         Debatable: 0

·         Bad: 21

10Expel immigrants who are in the United States illegally.

·         Good: 0

·         Debatable: 0

·         Bad: 22

We’ll find out what the American people think later this year!

Weekly Focus – Think About It

“And along the way I discovered that a lot of great originals in history were procrastinators. Take Leonardo da Vinci. He toiled on and off for 16 years on the Mona Lisa. He felt like a failure. He wrote as much in his journal. But some of the diversions he took in optics transformed the way that he modeled light and made him into a much better painter.”

--Adam Grant, Organizational psychologist

* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.  These risks are often heightened for investments in emerging markets. * 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. * 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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