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Weekly Market Commentary

January 29, 2018

 

Fast Facts

Disqualified! – 12 four-legged contestants were disqualified from a camel beauty contest in Saudi Arabia for using Botox. The camel breeder explained that they wanted the judges to notice their lips, jaw and nose so they gave the beauty filler to the camels.

Can’t Sleep? - Make a list. Scientists at Baylor University discovered that volunteers who wrote down a small to-do list, before hoping into bed, covering the next few upcoming days slept better!

Hmm – New research indicates that 0 percent of Icelandic people under the age of 25 believe in the Bible’s account of the Earth’s creation. Icelandic belief in elves, meanwhile, remains stable above 50 percent in the most recent surveys.

Weekly Focus – Think About It

“Conservation is a state of harmony between men and land.”

--Aldo Leopold, American author and conservationist

The Markets

The numbers are coming in.

Publicly-traded companies report their earnings and sales numbers for the previous quarter in the current quarter. For example, fourth quarter’s sales and earnings are reported during the first quarter of the year, and first quarter’s sales and earnings will be reported during the second quarter, and so on.

Through last week, about one-fourth of the companies in the Standard & Poor (S&P)’s 500 Index had reported actual sales and earnings for the fourth quarter of 2017. As far as sales go, a record number – 81 percent – of companies sold more than expected during the fourth quarter. That was quite an improvement. FactSet reported:

“During the past year (four quarters), 64 percent of the companies in the S&P 500 have reported sales above the mean estimate on average. During the past five years (20 quarters), 56 percent of companies in the S&P 500 have reported sales above the mean estimate on average.”

The mean is the average of a group of numbers.

The money a company makes through sales is called revenue. For instance, if a lemonade stand sells 100 glasses of lemonade for $1 each, then the proprietors have earned $100. That is the stand’s ‘revenue.’ Of course, as every parent who has financed a lemonade stand knows, revenue doesn’t include the cost of the product. ‘Earnings’ are what the company has left after expenses – the bottom line. If every glass of lemonade cost 50 cents, then the stand’s earnings are $50.

Companies in the S&P 500 are doing pretty well on earnings, too. About three out of four companies have reported earnings higher than expected. Overall, earnings are 4.5 percent above estimates.

Through Friday, annual earnings growth for S&P 500 companies was 10.1 percent. It’s still early in the fourth quarter earnings season, but the data so far seem likely to confirm that 2017 was a bright, sun-shiny year for U.S. companies.


Data as of 4/7/17

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

2.2%

7.5%

25.1%

11.8%

13.9%

7.8%

Dow Jones Global ex-U.S.

1.9

7.0

28.2

7.8

5.5

1.6

10-year Treasury Note (Yield Only)

2.7

NA

2.5

1.8

2.0

3.6

Gold (per ounce)

1.4

4.4

13.7

1.8

-4.0

3.9

Bloomberg Commodity Index

2.6

3.0

2.9

-3.4

-8.4

-7.1

DJ Equity All REIT Total Return Index

1.7

-2.8

4.6

2.8

8.2

7.4

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.

Certain parts of the circular economy probably adapt to cities and towns better than they do to rural areas.

What is the circular economy?

It is “a system that reduces waste through the efficient use of resources. Businesses that are part of the circular economy seek to redesign the current take/make/dispose economy, a model which relies on access to cheap raw materials and mass production. For example, car sharing addresses the inefficiency of privately owned cars – which are typically used for less than one hour a day,” explains Morgan Stanley.

Imagine not owning a car.

Clearly, it’s not something that would work everywhere. However, if you live in a city or town that has public transportation, ride sharing, car rentals, and bicycles, it’s possible. If you’re retired and you can organize your days in the way you like, it may even be sensible because owning a car is expensive. Transportation costs are the second highest budget item for most households, reports U.S. News. Housing costs top the list.

Giving up a car could help households save a lot of money.

According to AAA, owning and operating a new car in 2017 cost about $8,469 annually, on average, or $706 a month. Small sedans are the least costly ($6,354 per year), on average, and pickup trucks are the most expensive ($10,054 per year), on average, of the vehicles in the study. The calculations include sales price, depreciation, maintenance, repair, and fuel costs.

AAA’s estimate does not include insurance. In 2017, the national average premium for a full-coverage policy was $1,318 annually, according to Insure.com. Auto insurance premiums are highest in Michigan ($2,394) and lowest in Maine ($864).

Combining the averages, the cost of auto ownership is almost $10,000 a year. It’s food for thought.

Best regards,

John Klevens, CFP

P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

Sources: The Week, The Washington Post, The Economist, The Atlantic, SmithsonianMag.com
Portions of this newsletter has been prepared by Peak Advisor Alliance