July 11 2017
Things you may want to know…
Last Friday, Financial Times (FT) published, ‘Five markets charts that matter for investors.’ Among the issues addressed in the charts were:
The bond market bear watch. The yield on 10-year German Bunds (Germany’s government bonds) reached an 18-month high of 0.58 percent recently. Yields rose after the European Central Bank’s Mario Draghi indicated its stimulus efforts would end at some point.
When bond yields rise, bond values fall, and that makes rising interest rates quite a significant event for anyone who holds lower yielding bonds. In the United States, 10-year U.S. Treasuries moved to a seven-week high last week and then dipped lower following the release of the Federal Open Market Committee meeting minutes, reported CNBC.com.
Financial companies gaining favor. During the past month, U.S. stock markets have seen a sector rotation. FT reported:
“…S&P financials have gained some 6 percent, with tech sliding almost 4 percent. That still leaves financials lagging behind the S&P 500 for the year and well behind the roughly 17 percent gain for tech. A similar story has unfolded in Europe between banks and tech.”
Investors’ appetite for financial companies may reflect the belief higher interest rates are ahead. Banks and other financial firms generally benefit when interest rates rise. Investor’s Business Daily reported:
“Several Wall Street giants have warned of weak trading revenue in Q2, continuing the lackluster trend in 2017…Still, bank stocks large and small have been leading in recent weeks, helped by higher bond yields and massive buyback and dividend plans.”
Last week, the unemployment rate in the United States rose from 4.3 to 4.4 percent. It was good news according to an expert cited by Barron’s, “…the rise in labor force participation indicates slack remains in the labor market.” That may be the reason wages showed little improvement.
- Data as of 7/7/20171-WeekY-T-D1-Year3-Year5-Year10-Year
- Standard & Poor’s 500 (Domestic Stocks)0.0010.0830.1560.070.1240.047
- Dow Jones Global ex-U.S.-0.61218.2-1.45.3-1.4
- 10-year Treasury Note (Yield Only)2.4NA220.127.116.11.2
- Gold (per ounce)-2.14.9-10.4-2.5-5.26.3
- Bloomberg Commodity Index-1-6.5-4.4-14.9-10.1-7.2
- DJ Equity All REIT Total Return Index18.104.22.1680.310.14.8
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.