It has been a very good year, so far.
Through the end of last week, the Standard & Poor’s 500 Index posted 24 record highs and delivered returns in the high single digits. The MSCI World ex USA Index was up more than 11 percent, and the MSCI Emerging Markets Index gained more than 17 percent.
After reading those numbers, many people would assume bond markets are down for the year. After all, stock and bond markets tend to move in different directions. Zacks explained,
“Stock and bond prices usually move in opposite directions. When the stock market is not doing well and becomes risky for investors, investors withdraw their money and put it into bonds, which they consider safer. This increased demand raises bond prices. When stocks rally and the risk seems justified, investors may move out of bonds and into stocks, driving stock prices up further.”
That hasn’t been the case recently. Bonds have been delivering attractive returns, too. The Bloomberg Barclay’s U.S. Aggregate Bond Index is up 2.9 percent year-to-date, while its Global Aggregate Bond Index is up 4.7 percent, and its Emerging Markets Aggregate Bond Index is up 5.5 percent.
So, why are stock and bond markets both showing attractive gains for the year?
There are a number of possibilities. Zacks described one of the most straightforward. “When stocks are doing well but investors remain skeptical about how long they will do well, stock and bond prices can rise together. This is because investors continue to put money in stocks but also put money into bonds just in case the stock market drops.”
There is nothing wrong with a little skepticism.
|Data as of 6/23/17||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor’s 500 (Domestic Stocks)||0.2%||8.9%||15.4%||7.5%||13.2%||5.0%|
|Dow Jones Global ex-U.S.||0.1||12.8||14.2||-1.0||6.1||-1.1|
|10-year Treasury Note (Yield Only)||2.1||NA||1.7||2.6||1.6||5.1|
|DJ Equity All REIT Total Return Index||0.0||6.0||4.7||9.5||11.2||6.4|
S&P 500, Dow Jones Global ex-U.S., returns exclude reinvested dividends 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.
IF YOU LIVE IN NORWAY, DENMARK, ICELAND, SWITZERLAND, OR FINLAND, THEN you’re among the happiest people in the world. On the other hand, if you reside in Sierra Leone, Bulgaria, Egypt, Palestinian Territories, or Tunisia, you’re among the least happy, according to the United Nation’s World Happiness Report 2017.
The report relies on six measurements to “explain happiness differences among countries and through time.” These include:
- Income (GDP per capita)
- Healthy life expectancy (Relative to other nations)
- Social support (Having someone to count on in times of trouble)
- Generosity (Charitable donations)
- Freedom (To make life choices)
- Trust (Defined as the absence of corruption in business and government)
While measuring ‘happiness’ or ‘satisfaction with life’ may seem frivolous to some, others believe it should be a cornerstone of governance. The report’s authors explained, “Happiness is increasingly considered to be the proper measure of social progress and the goal of public policy.”
For instance, Norway, which is an oil-rich nation, is the happiest country in the world even though oil prices are relatively low. The World Happiness Report 2017 suggests the country “achieves and maintains its high happiness not because of its oil wealth, but in spite of it. By choosing to produce its oil slowly, and investing the proceeds for the future rather than spending them in the present, Norway has insulated itself from the boom and bust cycle of many other resource-rich economies.”
The United States ranks 14th in the world. While our country’s income and healthy life expectancy remain high, keeping us at the top of the list, other factors have caused Americans’ happiness to deteriorate. The study found “less social support, less sense of personal freedom, lower donations, and more perceived corruption of government and business.” America’s issues, the report opines, are social, rather than economic.
|Fredrick J. Livingston, CFP, AIF||Mark H. Winston, CFP, AIF|
|Securities offered through LPL Financial, LLC, Member FINRA/SIPC.
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or go here: https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/Fn+1.pdf
 https://www.msci.com/end-of-day-data-search or go here: https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/Fn+3.pdf
 http://finance.zacks.com/stocks-bonds-up-same-time-7209.html (or go to: https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/When+Do+Stocks+%26+Bonds+Go+Up+at+the+Same+Time_+_+Finance+-+Zacks.pdf)