Weekly Market Commentary, June 27, 2018

June 27, 2018  | By Robare & Jones

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The Markets

Global stocks declined last week as the Trump administration’s rhetoric and proposals regarding global trade continued to concern investors. OPEC indicated it would increase oil production less than expected, and oil prices climbed between 3 percent and 5 percent depending on the market. General Electric (GE) was removed from the Dow Jones Industrial Average after months-long underperformance. GE was the last of the original companies still included in the index, dating back to its formation in 1896. It will be replaced by Walgreens Boots.

The S&P 500 dropped 0.9 percent, the global MSCI ACWI dropped 1.1 percent, and the Bloomberg BarCap Aggregate Bond Index was down a negligible amount.

Data as of 06/22/2018 1-week YTD 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) -0.9% 3.0% 13.2% 9.1% 11.9% 7.7%
Dow Jones Global ex-U.S. -1.2 -3.8 6.5 2.2 4.9 0.5
10-year Treasury Note (Yield Only) 2.9 NA 2.1 2.4 2.6 4.2
Gold (per ounce) -1.3 -2.1 1.5 2.3 -0.3 3.7
Bloomberg Commodity Index -0.4 -1.0 10.0 -4.4 -7.1 -9.2
DJ Equity All REIT Total Return Index 2.4 0.3 3.4 7.8 9.7 7.9

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 News

The trade dispute between the United States and China continues to worsen. So far, the effect on consumers has been minimal because the Trump administration has targeted intermediate goods purchased primarily by businesses. Eventually, however, those costs will be passed on to the consumer. With the proposal of additional tariffs on $200 billion in Chinese goods, and possibly as much as $400 billion if China retaliates, consumers will likely see price increases in consumer products ranging from clothing to electronics. One consumer product has already seen a price hike – washing machines have risen 17 percent since January.

The accompanying chart above shows a list of consumer goods that could see price increases going forward. A possible 10 percent tariff could be placed on the next round of products, which include furniture and electronics. In particular, smartphones could be the most significant target as 70 percent of cell phones are assembled in China.

Fun Story

This bear got trapped in a Subaru Outback in Lake Tahoe

Many investors have wondered where the bear has gone during the long bull market that started in 2009. We may have tracked it down, at least temporarily. A bizarre event occurred in Lake Tahoe last week as a bear found itself stuck inside a Subaru Outback. No one quite knows how the bear got into the vehicle, but they do know it was trapped. The interior was so badly destroyed, the doors could not be unlocked. A brave Placer County deputy broke the window to help the bear escape.

Newsletter Sources

https://www.ft.com/content/49d0229e-73c7-11e8-aa31-31da4279a601 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-25-18_FinancialTimes-Flat_Yield_Curve_Sends_a_Grim_Message_for_Investors_in_2019-Footnote_1.pdf
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
https://www.marketwatch.com/story/the-us-economy-is-roaring-but-the-yield-curve-is-flattening-what-gives-2018-06-14
https://www.wsj.com/articles/trade-tensions-pinch-u-s-yield-curve-1529432210 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-25-18_WSJ-Trade_Tensions_Pinch_US_Yield_Curve-Footnote_4.pdf
https://www.durabilityanddesign.com/news/?fuseaction=view&id=19235
https://www.economist.com/science-and-technology/2018/06/14/making-buildings-cars-and-planes-from-materials-based-on-plant-fibres (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-25-18_TheEconomist-Making_Buildings_Cars_and_Planes_from_Materials_Based_on_Plant_Fibres-Footnote_6.pdf
https://www.scientificamerican.com/article/stronger-than-steel-able-to-stop-a-speeding-bullet-mdash-it-rsquo-s-super-wood/
https://www.brainyquote.com/quotes/mark_twain_121629

Chart Source:
https://blogs.wsj.com/dailyshot/2018/06/21/the-daily-shot-the-social-security-program-faced-cash-deficits-each-year-since-2009/?guid=BL-278B-1144&mod=searchresults&page=1&pos=2&dsk=y