September 22, 2015
The Wait for Normalcy Continues
As Tom Petty often sang, "The waiting is the hardest part."
Whether it's waiting for college acceptance letters, medical test results, employment offers, or Federal Reserve monetary policy changes, waiting can produce a lot of anxiety. A 2012 research paper written by Associate Professor Kate Sweeney and Graduate Fellow Sara Andrews of the University of California, Riverside, explained it like this:
"...Although waiting for inevitable events such as the arrival of a bus or one's turn in line may be irritating...the combination of uncertainty about the outcome and waiting for that outcome can be particularly excruciating. In fact, waiting may be more anxiety provoking than actually facing the worst case scenario..."
That may go a ways toward explaining why markets didn't rally when the Federal Reserve decided to leave rates unchanged last week. The Federal Open Market Committee's statement indicated they were concerned, "Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term."
On the face of it, continued low rates should have been good news for assets like stocks, according to Barron's. However, any positive aspects to the news were mitigated by the fact everyone expects the Fed to begin raising rates soon. Investors are waiting for it to happen, and they're uncertain how economies and markets will react when it does.
Heightened anxiety may be one of the reasons investors responded the way they did last week. On Friday, after mulling the Fed's decision, national stock market indices around the world - in the United States, England, Germany, France, and Japan - fell significantly, according to Yahoo! Finance.
Now, we're back to waiting.
If anxiety remains high, markets may be volatile.
|Data as of 9/18/15||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor's 500 (Domestic Stocks)||-0.2%||-4.9%||-2.7%||10.3%||11.4%||4.8%|
|Dow Jones Global ex-U.S.||1.3||-6.0||-13.0||1.3||0.9||1.3|
|10-year Treasury Note (Yield Only)||2.1||NA||2.6||1.8||2.7||4.3|
|Gold (per ounce)||3.8||-4.8||-6.5||-13.6||-2.3||9.4|
|Bloomberg Commodity Index||-1.4||-15.9||-27.2||-15.9||-8.7||-6.6|
|DJ Equity All REIT Total Return Index||2.8||-4.4||6.5||7.9||10.8||6.8|
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.
Honoring the Ignoble Laureates
It's official. The IGs are in. Ignoble is a word rarely heard in everyday conversation. Merriam-Webster defines it as meaning, "of low birth or common origin, or characterized by baseness, lowness, or meanness."
The 25th First Annual Ig® Nobel Prize Ceremony was held last week at Harvard University. Improbable.com reported, "Winners traveled to the ceremony, at their own expense, from around the world to receive their prizes from a group of genuine, genuinely bemused Nobel Laureates..." Winners completed research that made people laugh and then caused them to think.
- The Management Prize went to Gennaro Bernile, Vineet Bhagwat, and P. Raghavendra Rau, authors of 'What Doesn't Kill You Will Only Make You More Risk-Loving: Early-Life Disasters and CEO Behavior.' They examined the link between CEOs' early-life exposure to major fatal disasters and the financial and investment policies adopted by their companies. They found, "CEOs who experience fatal disasters without extremely negative consequences lead firms that behave more aggressively, whereas CEOs who witness the extreme downside of disasters behave more conservatively."
- The Economics Prize was awarded to the Bangkok Metropolitan Police, which implemented a new policy in an effort to reduce bribery. They pay a bonus to police officers who refuse to accept bribes, even though the officers are required by law not to accept bribes. (It's a concept that may resonate with parents.)
- The Literature Prize went to Mark Dingemanse, Francisco Torreira, and Nick J. Enfield, who presented evidence and arguments supporting the idea that 'huh?' is a word, and that it "is found in roughly the same form and function in spoken languages across the globe."
If you're interested in learning about the ignoble undertakings of other winners (who documented chicken walking like dinosaurs, created bee sting pain indices, and completed other thought-provoking experiments), visit www.Improbable.com.
Weekly Focus - Think About It
"A day without sunshine is like, you know, night."
—Steve Martin, American comedian
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management
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.
http://www.katesweeny.com/uploads/2/6/9/4/26944848/sweeny__andrews_2014_jpsp.pdf (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/09-21-15_AmerPsychologicalAssn-Mapping_Individual_Differences_in_the_Experience_of_a_Waiting_Period-Footnote_2.pdf)
http://www.barrons.com/articles/for-markets-its-the-treacherous-season-1442637816?mod=BOL_hp_we_columns (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/09-21-15_Barrons-For_Markets_Its_the_Treacherous_Season-Footnote_4.pdf)
http://finance.yahoo.com/;_ylt=AhD.Uke2qEIR0jVXyNZxv5d.FJF4 (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/09-21-15_YahooFinance-National_Stock_Market_Indices-Footnote_6.pdf)
IRS Circular 230 Disclosure: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter. Please contact us if you wish to have formal written advice on this matter.
ADV & Investment Objectives: Please contact The Dowling Group if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part II of Form ADV and is available for your review upon request.
It's a busy world. Our newsletter helps keep you tuned in to major market events, money-saving opportunities, filing deadlines, and other important information. One email per week and no spam — promise.Subscribe