­Weekly Market Commentary, June 5, 2018

June 5, 2018  | By Robare & Jones

The Markets

If the countries were instruments, last week sounded like a fifth grade garage band.

World markets were buffeted by a clamor of good, bad, and unexpected news last week. Events that captured media and investor attention included:

  • Taxing America’s allies. Early in the week, investors weren’t the only ones riled by the administration announcement it would impose hefty trade tariffs on American allies. “Brussels’ top trade official vowed to respond to Donald Trump’s new tariffs on imports of steel and aluminum from the EU, Canada, and Mexico with measures of its own, and warned that the EU has “closed the door” on trade talks with the U.S.”
  • Breaking protocol. A strong unemployment report helped settle volatility stirred up by tariff talk. However, a preemptive Presidential tweet introduced controversy. “While not breaking the 8:30 a.m. EDT embargo on the actual numbers, Trump’s tweet appeared to violate a 1985 federal rule barring members of the executive branch from commenting on the employment report until one hour after the release of the report in order to avoid affecting ‘financial and commodity markets,’” reported Barron’s.
  • Counting chickens. Although the summit with North Korea is on the calendar again, the commemorative Korea Peace Talks Coin is selling at a 20 percent discount in the White House gift shop.
  • Puzzling choices. Giuseppe Conte is Italy’s new Prime Minister. He has a tough job ahead. Despite electing “…western Europe’s first anti-establishment government bent on overhauling European Union rules on budgets and immigration,” Italians aren’t keen on leaving the euro behind. Last week, “…opinion polls…showed between 60 and 72 percent of Italians did not want to abandon the euro,” reported Reuters.

Despite the noise, the Standard & Poor’s 500 Index and NASDAQ forged ahead last week. That may have something to do with valuations. Barron’s wrote, “…the S&P 500…now trades at 16.5 times 12-month earnings estimates, down from 18.2 at the beginning of the year…”

 

Data as of 06/01/2018 1-week YTD 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) 0.5% 2.3% 12.5% 9.0% 10.8% 7.0%
Dow Jones Global ex-U.S. -0.8 -2.4 7.7 2.9 3.7 -0.1
10-year Treasury Note (Yield Only) 2.9 NA 2.2 2.2 2.1 4.0
Gold (per ounce) -0.7 -0.2 2.4 2.6 -1.6 3.8
Bloomberg Commodity Index -0.5 2.6 9.7 -3.6 -7.3 -8.3
DJ Equity All REIT Total Return Index 2.0 -2.4 2.5 6.1 7.5 6.8

S&P 500, 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.

Download Market Data Table

 

Economic Fundamentals

The U.S. jobs report testifies to the overall strength in the economy. Employers created 223,000 jobs, surpassing expectations of 188,000. The unemployment rate dropped to 3.8 percent, and the report showed wages have climbed a healthy 2.7 percent over the last year. Black and Latino unemployment continues to reach record lows, and additional economic reports last week suggest those earning the lowest wages are seeing the highest percentage increases in earnings.

 

 

Fun Story of the Week

Bearded Men Taking Selfies

A new mini-trend on Twitter is for bearded men to take selfies of their chins rather than looking at the camera. The modest innovation drew a number of similar photos and responses. For those of you who say social media is contributing negatively to the overall culture, you will find this article interesting.

Newsletter Sources

https://www.ft.com/content/11d2890a-65b6-11e8-a39d-4df188287fff (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-04-18_FinancialTimes-Global_Markets_Rally_as_US_Jobs_Growth_Calms_Volatility-Footnote_1.pdf

https://www.barrons.com/articles/take-this-jobs-report-and-tweet-it-1527897844 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-04-18_Barrons-Take_this_Jobs_Report_and_Tweet_It-Footnote_2.pdf

https://www.whitehousegiftshop.com/searchresults.asp?Search=commemorative+coins&Submit=

https://www.reuters.com/article/us-italy-politics/markets-breathe-easier-as-italy-government-sworn-in-idUSKCN1IX49T

http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html (Click on U.S. & Intl Recaps, “Italy and Spain steer investor expectations”, scroll down to chart) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-04-18_Barrons-Global_Stock_Market_Recap-Footnote_5.pdf

https://www.barrons.com/articles/dow-shows-nerves-of-steel-amid-trade-tensions-1527897602 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-04-18_Barrons-Dow_Shows_Nerves_of_Steel_Amid_Trade_Tensions-Footnote_6.pdf

https://www.nationalgeographic.org/media/earths-fresh-water/

https://water.usgs.gov/edu/earthhowmuch.html

http://www.bbc.co.uk/guides/z22fb82

https://www3.epa.gov/safewater/kids/water_trivia_facts.html

https://water.usgs.gov/edu/qa-home-percapita.html

http://www.wri.org/blog/2018/01/power-plants-use-water-we-have-no-idea-how-much

http://www.newsweek.com/day-zero-drought-cape-town-792036

https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/the-business-opportunity-in-water-conservation

https://www.brainyquote.com/quotes/john_burroughs_760773?src=t_water

Chart Source:

https://www.cnbc.com/2018/06/01/nonfarm-payrolls-may-2018.html