Bond Boss Bill Gross Leaves Pimco…. and other things happened.
Last week offered some lessons in career management, economics, and investor impulse, among other things. Derek Jeter, the well-loved Yankees shortstop, finished the final home game of his career by smacking a game-winning hit. Throughout his last season, ticket prices for Yankees games soared on the secondary market with $16 bleacher seats selling for more than $200. By the end of the season, ticket vendors were asking as much as $11,000 a seat.
On the other coast, Bill Gross, renowned bond guru, did not retire. Gross left the firm he helped found for a smaller money manager. Shares of stock in his new company rose about 43 percent as investors anticipated the potential inflow of new assets. They also anticipated an outflow of assets from his old firm, according to Barron’s, which caused yields on Treasuries and corporate bonds to move higher on Friday, pushing prices south.
Gross’s shifting alliance wasn’t the only thing churning bond markets last week, however. Trepidation about global economic growth and geopolitical matters (e.g., Russia vs. Ukraine, etc.) had investors fleeing to “safe assets” earlier in the week. That pushed Treasury yields lower and prices higher. Barron’s reported:
“Thursday’s markets were all about a flight from risk, in part because of reports of a Russian draft law to confiscate foreign-owned assets in retaliation for Ukraine sanctions. More important is the message from “Dr. Copper,” suggesting weakness globally, whether in faltering Europe or slowing China. All of which suggests it will be an even more “considerable time” until the Federal Reserve raises interest rates.”
Volatility may be the name of the game for a while. Bloomberg suggested looking backward for guidance about the future. In 2013, Fed Chairman Ben Bernanke suggested tapering could begin sooner than expected. Treasury yields leapt by 1 percent as the market threw a “taper tantrum.” Just last week, Chairwoman Janet Yellen warned markets the Federal Open Market Committee statement was not a promise about the timing of rate hikes. Bloomberg said investors remained complacent. Apparently, they weren’t concerned unexpected economic strength in the United States could move the timetable forward.
At the end of the week, the Commerce Department reported economic growth was more robust than originally thought during the second quarter. The economy grew at the fastest rate in more than two years.
Data as of 9/26/14 |
1-Week |
Y-T-D |
1-Year |
3-Year |
5-Year |
10-Year |
| Standard & Poor’s 500 (Domestic Stocks) |
-1.4% |
7.3% |
16.7% |
19.5% |
13.3% |
6.0% |
| 10-year Treasury Note (Yield Only) |
2.5 |
NA |
2.6 |
1.9 |
3.3 |
4.0 |
| Gold (per ounce) |
-0.5 |
1.0 |
-9.0 |
-8.8 |
4.1 |
11.5 |
| Bloomberg Commodity Index |
-0.3 |
-5.2 |
-6.7 |
-6.0 |
-0.8 |
-2.3 |
| DJ Equity All REIT Total Return Index |
-1.0 |
14.0 |
12.2 |
16.1 |
15.4 |
8.7 |
S&P 500, Gold, DJ-UBS 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 TR 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.
*The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in this 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 London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ 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 TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* 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.
Sources:
http://time.com/money/3052954/derek-jeter-yankees-farewell-tour-ticket-prices/
http://online.barrons.com/news/articles/SB52784017629588234037504580170200320391396?mod=BOL_hp_we_columns (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/09-29-14_Barrons-Bond_Kings_New_Realm-Footnote_2.pdf)
http://online.barrons.com/news/articles/SB52784017629588234037504580170133745626458 (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/09-29-14_Barrons-Dow_Off_1_Percent_for_Week-Footnote_3.pdf)
http://blogs.barrons.com/incomeinvesting/2014/09/25/long-treasuries-lead-in-risk-off-lurch/ (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/09-29-14_Barrons-Long_Treasuries_Lead_in_Risk-Off_Lurch-Footnote_4.pdf)
http://in.reuters.com/article/2014/09/26/markets-global-idINL6N0RR3AP20140926
The post Weekly Perspective – September 29th, 2014 appeared first on Happiness Dividend Blog – Personal Finance, Education and Investment Guidance.