The Markets
The word “jouncy” may have started life as a combination of bouncy and jolting – and it’s a pretty good way to describe what happened to stock markets last week.
The week started with the Standard & Poor’s 500 Index experiencing daily gains and losses of about one percent. Other major U.S. indices saw sizeable daily swings in value, too. Lu Wang of Bloomberg reported:
“The harrowing reversals reflect a particularly stark divide between bull and bear cases in markets right now. On one side, risk appetites are being constricted by lingering uncertainty over the government debt ceiling, tightening Federal Reserve policy and disrupted supply chains. At the same time, sentiment is being buttressed by improving [COVID-19] trends, an economy that keeps chugging along and forecasts for more double-digit earnings growth from corporate America.”
Considering how volatile things were early in the week, investors were remarkably sanguine about Friday’s less-than-stellar employment report. The Bureau of Labor Statistics indicated that less than 200,000 jobs were created in September. According to Ben Levisohn of Barron’s, the number was below expectations and provided relatively little insight to economic growth:
“Yes, the U.S. added just 194,000 jobs in September, well below forecasts for 500,000, and that’s the kind of miss that would suggest a slowing economy. The number, though, was close to meaningless, given the seasonal adjustments – which may have skewed it lower – and by comparison to the household survey, which showed more than 500,000 new jobs as the unemployment rate fell to 4.8%. Try making an investment decision off that.”
Consumers, investors, and central bankers are also expending a lot of energy worrying about power – the kind that’s generated by natural gas, oil, coal, wind, sun and other sources. Supply and demand issues in energy markets have caused prices to rise and is pushing inflation higher, according to Julia Horowitz of CNN Business.
Major U.S. indices finished the week higher, although the Nasdaq Composite’s gain was just 0.1 percent. The yield on a 10-year U.S. Treasury rose to 1.6 percent.
| Data as of 10/8/21 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
|---|---|---|---|---|---|---|
| Standard & Poor's 500 Index | 0.8% | 16.9% | 27.4% | 15.0% | 15.2% | 13.9% |
| Dow Jones Global ex-U.S. Index | 0.5 | 4.5 | 19.0 | 8.0 | 6.7 | 4.9 |
| 10-year Treasury Note (yield only) | 1.6 | N/A | 0.8 | 3.2 | 1.8 | 2.1 |
| Gold (per ounce) | 0.9 | -6.1 | -6.1 | 14.3 | 7.1 | 0.6 |
| Bloomberg Commodity Index | 1.7 | 31.5 | 42.2 | 5.7 | 3.4 | -3.3 |
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; 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, MarketWatch, djindexes.com, Federal Reserve Bank of St. Louis, 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.
Low Energy
Currently, there is a mismatch in energy supply and energy demand in many parts of the world. In some places, it is creating issues that countries haven’t experienced in some time. For instance:
- In Europe, the cost to heat the average home rose about fivefold from September 2020 to September 2021, according to The Economist.
- In India, where about 70 percent of electricity is generated by burning coal, coal supplies are running low, according to Arunoday Mukharji of BBC.
- In China, rolling blackouts have implemented to address an electricity shortage, reported Peter Hoskins of BBC.
- In Lebanon, power plants went offline over the weekend and the country is expected to be without power for several days, reported Laila Bassam of Reuters.
- In the U.S., oil prices are at a seven-year high, and the price of gasoline was above $3 a gallon. In some places, it was above $5 a gallon, reported Pippa Stevens of CNBC.
There are many reasons for the current energy shortage, reported Will Englund of The Washington Post:
“The economic recovery from the pandemic recession lies behind the crisis, coming after a year of retrenchment in coal, oil and gas extraction. Other factors include an unusually cold winter in Europe that drained reserves, a series of hurricanes that forced shutdowns of Gulf oil refineries, a turn for the worse in relations between China and Australia that led Beijing to stop importing coal from Down Under, and a protracted calm spell over the North Sea that has sharply curtailed the output of electricity-generating wind turbines.”
The energy shortage may be more challenging to overcome than some other types of shortages, opined The Economist, because investment in fossil fuels has been declining as the world moves toward lower emissions and greener energy sources. “The long-term challenge is to smooth out volatility as the switch to renewables continues.”
Weekly Focus – Think About It
“Do I contradict myself?
Very well then I contradict myself,
(I am large, I contain multitudes.)”
—Walt Whitman, poet
Wishing you and your families well,
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.
- Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
- Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
- The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
- All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
- The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
- The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
- Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
- The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
- The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
- International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
- Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
- Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
- Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
- Past performance does not guarantee future results. Investing involves risk, including loss of principal.
- You cannot invest directly in an index.
- Stock investing involves risk including loss of principal.
- The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts set forth may not develop as predicted and are subject to change. Investing involves risk including loss of principal.
- The Price-to-Earning (P/E) ratio is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means investors are paying more for each unit of net income, thus, the stock is more expensive compared to one with a lower P/E ratio.
- These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
- This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
- The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
- Consult your financial professional before making any investment decision.
Sources:
https://www.barrons.com/market-data/stocks (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/10-11-21_Barrons_1.pdf)
https://www.bloomberg.com/news/articles/2021-10-05/stock-traders-rethink-their-own-moves-at-fastest-rate-in-year (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/10-11-21_Bloomberg_The%20Stock%20Market%20Hasnt%20Been_2.pdf)
https://www.bls.gov/news.release/empsit.nr0.htm
https://www.barrons.com/articles/stock-market-earnings-season-51633738642?mod=hp_LEAD_1_B_1 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/10-11-21_Barrons_The%20Stock%20Market%20Survived%20a%20Scary%20Week_4.pdf)
https://www.cnn.com/2021/10/07/business/global-energy-crisis/index.html
https://www.economist.com/leaders/2021/09/25/natural-gas-shortages-threaten-governments-green-goals (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/10-11-21_The%20Economist_Natural%20Gas%20Shortages%20Threaten%20Governments%20Green%20Goals_7.pdf)
https://www.bbc.com/news/business-58824804
https://www.bbc.com/news/business-58733193
https://www.cnbc.com/2021/10/06/americans-are-paying-the-most-for-gas-in-seven-years.html
https://www.washingtonpost.com/business/2021/10/09/energy-crisis-global/ (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/10-11-21_Washington%20Post_An%20Energy%20Crisis%20is%20Gripping%20the%20World_12.pdf)
https://www.goodreads.com/author/quotes/1438.Walt_Whitman
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.
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