It was a good week for a lot of stocks but not bank stocks.
The Standard & Poor’s 500 (S&P 500) Index and the Dow Jones Industrial Average (DJIA) both finished at record highs last week. Barron’s indicated investors owe Federal Reserve Chair Janet Yellen a debt of gratitude:
“The main force behind the rally was the dovish performance by Federal Reserve Chair Janet Yellen in Congress on Wednesday and Thursday when she reiterated that rate hikes would most likely be gradual. On balance, her remarks were interpreted as evidence of continued accommodative monetary policy and, from there, stocks were off to the races. The ignition of the rally can almost be time-stamped to her appearance. Before her speech, the market was down for the week.”
Of course, some sectors of the stock market did better than others last week. In the S&P 500, Real Estate, Information Technology, and Consumer Staples stocks had the highest percentage gains at the close on Friday, while Financials, Telecommunications, and Consumer Discretionary stocks lagged, according to Fidelity.
In the Financials sector, banks were the weakest performers, finishing Friday almost a full percent lower. It was a bit of a mystery, wrote Financial Times (FT), since several banks beat earnings expectations. FT reported:
“Perhaps the most important factor that weighed on bank stock prices, however, had nothing to do with the comments from executives nor the quarterly financial results. Macroeconomic data published on Friday showed U.S. inflation at the consumer level cooled last month while retail sales fell short of estimates, pushing Treasury bond yields lower. Lower interest rates are bad news for banks, which make more money if they can charge borrowers more.”
Investors appear to believe there is smooth sailing ahead. The CBOE Volatility Index remained below 10.
|Data as of 7/14/17||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor’s 500 (Domestic Stocks)||1.4%||9.9%||13.7%||7.6%||12.7%||4.7%|
|Dow Jones Global ex-U.S.||2.8||15.1||16.3||-0.4||5.9||-1.3|
|10-year Treasury Note (Yield Only)||2.3||NA||1.5||2.6||1.5||5.0|
|Gold (per ounce)||1.2||6.1||-7.8||-2.0||-5.0||6.3|
|Bloomberg Commodity Index||1.1||-5.5||-5.1||-14.0||-10.2||-7.0|
|DJ Equity All REIT Total Return Index||1.4||5.1||-1.3||8.6||9.5||6.0|
merriam webster defines ‘disrupt’ as ‘To break apart,’ and ‘to throw into disorder.’ While disruption doesn’t sound like something anyone would enjoy much, it has the potential to create investment opportunities for those who share a vision and are willing to take risks.
Morgan Stanley recently wrote, “It’s hard to think of an industry that won’t be touched in some way by technological disruption over the next decade.” Here are a few of the trends that may really stir things up during the next few decades:
In addition, cities may lose a source of revenue if there is less need for parking. CNBC wrote, “Reports estimate self-driving vehicles have the potential to reduce parking space by about 61 billion square feet, which is about the size of Connecticut and Vermont combined.” This may be a boon for the real estate market.
The responsibilities of law enforcement may change, too, and crash test dummies may be out of work.
Morgan Stanley also pointed out that Blockchain, which enables electronic contracts and custody, may change the financial industry, and Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR) may help cure disease at the genetic level.
We live in interesting times!
Weekly Focus – Think About It
“Companies don’t have ideas. Only people do. And what motivates people are the bonds of loyalty and trust they develop around each other.”
–Margaret Heffernan, International businesswoman and author
Value vs. Growth Investing (7/14/17)
|US Large Cap||1.41||11.62||1.04||6.41||16.63||9.91||14.88|
|US Large Core||1.22||13.04||1.21||6.23||19.94||11.38||16.42|
|US Large Growth||2.51||18.95||1.63||10.00||19.11||11.11||15.53|
|US Large Val||0.41||3.55||0.19||3.00||11.00||7.21||12.77|
|US Mid Cap||1.44||9.66||0.85||5.40||15.22||8.78||15.69|
|US Mid Core||1.24||9.70||0.57||4.59||13.23||8.57||15.49|
|US Mid Growth||1.50||14.84||1.33||8.17||15.31||8.44||13.95|
|US Mid Val||1.62||4.61||0.65||3.55||17.19||9.30||17.70|
|US Small Cap||1.09||5.91||0.68||5.36||17.05||7.83||13.97|
|US Small Core||0.39||4.14||-0.48||4.52||16.04||7.77||14.14|
|US Small Growth||1.49||13.43||2.08||10.07||19.15||8.77||13.81|
|US Small Val||1.42||0.46||0.46||1.56||15.66||6.89||13.87|
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Michael L. Schwartz, RFC®, CWS®, CFS
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Michael L. Schwartz, RFC, CWS, CFS, a registered principal offering securities and advisory services through Independent Financial Group, LLC., a registered broker-dealer and investment advisor. Member FINRA-SIPC. Schwartz Financial and Independent Financial Group are unaffiliated entities.
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