Customary use on South Walton beaches took a beating recently, and American soybean growers likely sympathize with us. Of all asset classes measured by The Wall Street Journal, soybeans got hammered during the second quarter of 2018, falling almost 18 percent. Corn prices slid almost 10 percent as well. While agricultural commodities bore the brunt of trade policy kerfuffles, metal prices slumped, too. Gold and copper skidded 5 percent and almost 3 percent respectively.
U.S Treasury yields, based on the 10-year note, rose for the fourth consecutive quarter. The higher yield helps fixed-income investors but many analysts point out inflation could be on the rise, too. The Federal Reserve sets short-term rates, but supply and demand determine long-term rates. In mid-May, the 10-year Treasury hit a seven-year high (3.109 percent) but fell 8 percent off their highs closing at 2.847 percent by the end of June.
Oil prices soared during the second quarter, rising by over 13 percent. Pending Iranian sanctions and Venezuelan mismanagement coupled with U.S. pipeline bottlenecks kicked prices higher. Strong global economic growth also spurred demand for oil. While American consumers grumble about higher gasoline at the pump, rising oil prices caused a sharp sell-off in emerging market stocks. Emerging market investors can’t complain; last year the asset class rose almost 40 percent. A characteristic of emerging markets is volatility; savvy investors understand and plan accordingly.
The venerable Dow Jones Industrial Average finished the quarter on a down note ending up in negative territory for the year. Dow components like Caterpillar, Coca-Cola, and Boeing receive significant income from overseas and are sensitive to trade disruptions. The S&P 500, a more representative measure of the American economy, grew over the same period, 2.9 percent. The tech-heavy NASDAQ Composite doubled the S&P 500, growing 6.3 percent.
Tariffs pose a tremendous danger to American economic activity and around the world; they are the fiscal equivalent of a circular firing squad. With unemployment at levels not seen in almost a generation, to focus on tariffs is stunningly myopic. Cooler heads hopefully will prevail.
St. Joe Company Enemy Stumbles
In 2010, hedge fund operator David Einhorn’s star sparkled. Traditionally Einhorn exercised strict secrecy regarding his investment strategies. But in October of 2010, he delivered the St. Joe Company a harsh beatdown and announced plans to “short” (bet on the stock losing value) St. Joe. St. Joe stock trades 25 percent lower today but not as low as Einhorn predicted. More troubling for Mr. Einhorn his fund, Greenlight Capital, has dramatically underperformed the S&P 500 over the last few years. In reaction, investors have pulled over half of their investments from his management. Unfortunately, Greenlight opened to new investors in 2014 just in time for the decline. Hedge funds are a compensation arrangement, not an investment strategy.
You can’t always get what you want, but Buz Livingston, CFP can help figure out what you need. For specific recommendations, visit livingstonfinancial.net or come by the office in Redfish Village, 2050 Scenic 30A, M-1 Suite 230.