July 29, 2019
Lessons from the East
I have just returned from an amazing trip to Bali. This was my second visit to Southeast Asia in the last three years, the first being to Thailand in 2017. Anytime I travel, whether to another state or another country, I am keen to observe the world through my lenses as an investor and a financial planner, thinking what can I learn about local economy, the culture, and its people? In fact, I find this unorthodox form of “research” to be incredibly educational.
From an economic perspective, emerging market economies (which include those in Southeast Asia) represent approximately 50% of the worlds in terms of GDP but only represent about 12% of the global stock market index. While the U.S. stock market is the primary focus for U.S. investors, and has certainly been dominating in investment performance, we need to consider that future growth potential will likely be much stronger in the developing economies of the world. As investment managers, our global approach provides our clients with significant exposure to investments in both stock and bond markets around the world.
My greatest “takeaway” from my trip came from my interactions with the people of Bali. In terms of material wealth, they have far less than we have and lack many of the creature comforts that we consider to be “essential” in our daily lives. Yet, this doesn’t seem to bother them at all. In fact, they seem to be not only content but overflowing with happiness and peace. This happiness was so apparent to me in that it marked such a contrast to the level of contentment we have in the United States. Despite our economic wealth and high living standard, compared to most of the world, our level of stress is extremely high and only seems to be getting worse. For me, this serves as an important reminder of the value we provide, encompassing the financial planning work that we do with our clients. While we know that financial wellbeing is one of the greatest sources of stress, I have also seen how impactful it can be for people who have worked with us and completed a clear roadmap for their long-term financial goals. When we successfully increase the level of clarity and certainty around one’s ability to reach their goals, we find that our clients can experience a greater sense of wellbeing, happiness, and peace.
If you have not yet completed a financial plan through our Wealth Dashboard, I encourage you to contact us so you can learn more about this valuable resource that we make available to all of our clients.
It has been said there are two sides to every story. Just look at world financial markets. Stock markets and bond markets are telling very different stories.
In the United States, stock markets were blue ribbon winners last week.
The Standard & Poor’s 500 Index rebounded to a record high. The Nasdaq Composite also set a new record. Barron’s reported U.S. stock markets were supported by abundant optimism inspired by expectations for solid earnings growth and a Federal Reserve rate cut in July.
Optimism pushed stocks higher in Europe last week, too. CNBC reported investors were receptive to news suggesting the European Central Bank would ease monetary policy to support the European economy. A significant number of national stock indices in Europe, the Middle East, and Asia finished last week higher, according to Barron’s.
Bond markets have been telling a less optimistic story.
In many regions of the world, bond yields have sunk below zero, and bond buyers have been locking in losses by investing in bonds with negative yields.
In the United States, the 10-year Treasury yield remains positive, but it has dropped from 3.2 percent in November 2018 to 2.1 percent at the end of last week.
So, what are bond markets saying? Barron’s suggested some possibilities:
“…bond buyers locking in subzero yields aren’t doing it, of course, for love of losses. They might think that the certainty of small losses will prove a better deal in the years ahead than whatever stocks provide…There’s something else that negative yields could be telling us. Investors need bonds for things like diversification and setting aside money at known rates to offset known liabilities. For an investor who must buy bonds, a purchase here with negative yields isn’t necessarily a bet against stocks. It could just be a wager that bond yields won’t get much better – that slow growth and meager inflation will loom for many years.”
Time will tell.
Weekly Focus – Think About It
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* These views are those of Carson 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 Coaching. Carson Coaching is not affiliated with the named broker/dealer.
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https://www.barrons.com/articles/why-some-investors-are-buying-bonds-that-lose-money-51564179385?mod=hp_DAY_2 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/07-29-19_Barrons-Why_Some_Investors_are_Buying_Bonds_that_Lose_Money-Footnote_1.pdf)
https://www.barrons.com/articles/the-s-p-500-hit-a-new-high-because-the-market-still-expects-the-federal-reserve-to-cut-interest-rates-51564195482?mod=hp_DAY_3 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/07-29-19_Barrons_The_S_and_P_Hit_a_New_High_Because_the_Market_Still_Expects_the_Federal_Reserve_to_Cut_Interest_Rates-Footnote_2.pdf)
https://www.barrons.com/market-data/stocks/emea?mod=md_usstk_view_emea (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/07-29-19_Barrons-UK_FTSE_100_Stock_Index-Footnote_4.pdf)
https://www.barrons.com/market-data/stocks/asia?mod=md_emeastk_view_asia (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/07-29-19_Barrons-Hong_Kong_Hang_Seng_Stock_Index-Footnote_5.pdf)
https://www.amazon.com/Poamazon%20Power%20of%20Musicwer-Music-Pioneering-Discoveries-Science/dp/0802719961/ref=sr_1_1?keywords=Elena+Mannes+POwer+of&qid=1564244240&s=dmusic&sr=8-1 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/07-29-19_Book_Excerpt-The_Power_of_Music-Footnote_7.pdf)