Week of August 7, 2017
Who’s been buying shares of company stock?
Since the start of the bull market in 2009, U.S. companies have been buying their own stock. Stock buybacks peaked during the first three quarters of 2016 and have dropped off sharply since then, reports Financial Times citing a report from Goldman Sachs.
Companies participate in stock buyback (a.k.a. share repurchase) programs to improve shareholder value. For example, if company management believes a company’s shares are undervalued, it can buy shares on the stock market or offer shareholders a fixed price to purchase their shares. This reduces the number of shares in the marketplace and increases earnings per share, which has the potential to boost the company’s stock price.
The slowdown in stock buybacks hasn’t hurt stock markets. Financial Times reported:
- “The slowing pace of companies buying back their own shares has certainly not halted Wall Street’s stellar run so far this year. While there is a reduced tail wind of buybacks helping boost earnings per share via a lower share count, U.S. companies have reported robust year-on-year sales and earnings growth for the recent quarter. That has helped offset the decline in buyback activity, but some warn that the clock is ticking for Wall Street bulls.”
There was no sign of a slowdown in the bull market last week, though. The Department of Labor reported the United States added more new jobs than anyone had expected during July, and the unemployment rate fell to 4.3 percent – the same level as May 2017, which was the lowest in 16 years, according to Barron’s.
Jobs growth was music to many investors’ ears.
Financial Times reported, “U.S. equity indices hovered near record highs – with the Dow Jones Industrial Average touching an all-time peak of 22,089.05 in early trade – with financials bolstered by the rise in yields. European [markets] ended the week on a strong note, helped by a sharp retreat for the euro against the dollar.”
Data as of 8/4/17
Standard & Poor's 500 (Domestic Stocks)
Dow Jones Global ex-U.S.
10-year Treasury Note (Yield Only)
Gold (per ounce)
Bloomberg Commodity Index
DJ Equity All REIT Total Return Index
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; 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.
Saving Is as Easy As Riding A Bike!
If you would like to save more money – for retirement, college tuition, healthcare costs, or some other financial priority – hop on your bike and ride.
As it turns out, riding your bike may help boost your savings. Whether you commute to work on two wheels or cycle around town doing errands, opting for manpower instead of horsepower can help generate some additional savings, according to a source cited by Bankrate.com:
- “The average American household spends over $9,000 a year on transportation, making it the second-largest expense after housing…Many families simply take for granted the two-car, driving-to-work arrangement that’s the norm for American households and often don’t consider alternatives like public transportation, carpooling, or biking…That’s a shame, because its status as a major household cost means cutting transportation can radically cut your overall costs and, potentially, increase your ability to save…”
If you are serious about saving, imagine what your finances would look like if you:
- Drove less. AAA reported owning a small car costs about $6,600 a year, while rumbling around in an SUV costs more than $10,000 annually. (The estimate includes fuel, insurance, depreciation, maintenance, fees and licensing, finance charges, and tires.) Eliminating a car could significantly improve your ability to save.
- Cycled more. Not everyone can get by without a car; however, if you bike shorter distances or when the weather is good, then you could qualify for a low mileage discount on your auto insurance.
- Didn’t go to the gym. If you’re riding a bike to work or to run errands, then you probably don’t need spin class. The average gym membership runs $54 a month or almost $650 a year.
- Bought less stuff. Impulse purchases are less tempting when you’re cycling because bike baskets and saddlebags have limited storage space. Who knows how much that could help you save?
In addition to saving money, two-wheeled travel options are likely to improve your fitness and reduce the stress of rush hour driving. Cycling may even eliminate the need for dieting and some medications. Here’s an added bonus: If biking improves your longevity, you may have more time to spend the money you save!
P.S. Please feel free to forward this commentary to family, friends, or colleagues.
Securities offered through Jacques Financial, LLC (JFLLC) a Broker-Dealer, Member FINRA and SIPC.Certain associates of Joseph W. Jacques, CPA, CFPTM are registered representatives of JFLLC. Joseph W. Jacques, CPA, CFPTM and JFLLC are affiliated. Investment advisory services are offered through Jacques Advisors, LLC an affiliate of JFLLC. Tax services are offered through Jacques & Associates Certified Public Accountants, LLC an affiliate of JFLLC.
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and 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. The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
MSCI ACWI INDEX
The MSCI ACWI captures large and mid-cap representation across 23 Developed Markets (DM) and 23 Emerging Markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.
https://www.ft.com/content/c4de73e2-17a1-11e7-9c35-0dd2cb31823a (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/08-07-17_FinancialTimes-Five_Markets_Charts_that_Matter_for_Investors-Footnote_1.pdf)
http://www.barrons.com/articles/july-jobs-report-called-near-perfect-as-payrolls-and-wages-rise-1501850651 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/08-07-17_Barrons-July_Jobs_Report_Called_Near_Perfect_as_Payrolls_and_Wages_Rise-Footnote_4.pdf)
https://www.ft.com/content/b4257d20-78b8-11e7-a3e8-60495fe6ca71 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/08-07-17_FinancialTimes-Dollar_and_Treasury_Yields_Lifted_by_US_Jobs_Data-Footnote_5.pdf)