Weekly Market Commentary--March 14, 2016
The Markets
Stim-u-late mar-kets! Come on! It’s monetary easing.*
The European Central Bank (ECB) was singing a tune that invigorated financial markets last week.
The Wall Street Journal explained:
“The fresh measures included cuts to all three of the ECB’s main interest rates, €20 billion a month
of additional bond purchases atop the ECB’s current €60 billion ($67 billion) program, and an
expansion of its quantitative easing program to highly rated corporate bonds – all more aggressive
steps than analysts had anticipated. The central bank also announced a series of ultracheap fouryear
loans to banks, some of which could be paid to borrow from the ECB.”
Most national indices in Europe gained ground last week. The Financial Times Stock Exchange
Milano Italia Borsa (FTSE MIB), which measures the performance of the 40 most-traded stocks
on the Italian national stock exchange, was up almost 4 percent. Spain’s Indice Bursatil Español
Index (IBEX 35), which is comprised of the most liquid stocks trading on the Spanish continuous
market, gained more than 3 percent. Major markets in the United States moved higher, as well.
Of course, the harmony provided by global oil markets proved pleasing to investors, too. An
International Energy Agency (IEA) report suggested more equitable supply and demand balances
could mean oil prices have bottomed out.
Barron’s offered a word of caution, “Investors shouldn’t get too comfortable when it seems that oil
moves and central-bank maneuvers are the main reason stocks go up or down, not earnings and
economic growth.”
*Set to the tune of Kool and the Gang’s ‘Celebration.’ You know, “Cel-e-brate good times! Come
on! It’s a celebration.”
HERE’S SOME GOOD NEWS: Healthcare spending is expected to increase more slowly
during 2016! It’s projected to grow by 6.5 percent this year, according to a report from PWC.
That’s still a lot faster than inflation. The Economist projects overall consumer prices in the United
States will increase by 1.2 percent this year.
The report suggested several factors are contributing to lower healthcare spending, including:
* The Affordable Care Act’s Cadillac Tax. PWC reported the tax “…is motivating businesses
to enact high cost-sharing. Their workers are already responding to the higher deductibles by
scrutinizing what services are necessary and which are not…cost sharing can backfire if the
employee foregoes preventative care and faces years of chronic illness.” Twenty-five percent of
employers offer only high-deductible healthcare plans for employees.
* Virtual healthcare. Telemedicine appears to be the next big thing in medicine. Doctors making
house calls using real-time audio and video is the gold standard for service, according to the
Modern Medicine Network. Remote patient monitoring, pre-recorded videos, and computerassisted
or message-based communications also are being offered.
* New health advisors. A new variety of healthcare company is making information about
facilities, providers, services, and pricing more accessible. In some cases, financial incentives
encourage employees to seek treatment at a preferred facility.
These gains are more than offset by factors that are pushing healthcare spending higher, including:
* High-cost specialty drugs. PWC reported specialty drugs are becoming a focus for the
pharmaceutical industry. “With 700 specialty products currently in development, these investments
will soon surpass traditional drug investments…According to a recent Express Scripts report, total
national prescription spending increased 13.1 percent last year to about $980 per person.”
* Cyber security investments. Healthcare organizations are spending heavily on cyber security to
protect patients from data breaches. The cost of a breach is about $200 per patient record. The
cost of security is about $8 per patient record.
It’s critical to factor healthcare spending into retirement plans. In 2015, the Employee Benefits
Research Institute (EBRI) found a 65-year-old man needs $124,000 in savings and a 65-year-old
woman needs $140,000 if each wants a 90 percent chance of having enough money saved to cover
healthcare expenses in retirement. EBRI’s analysis did not include the savings needed to cover longterm
care expenses.
Weekly Focus – Think About It
“Yesterday is not ours to recover, but tomorrow is ours to win or lose.”
--Lyndon B. Johnson, Former U.S. President
* These views are those of Peak Advisor Alliance, and not the presenting Representative or the
Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named
broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of
principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the
value of fund shares is not guaranteed and will fluctuate.
*Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are
subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon
rate, price, yield, maturity, and redemption features.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of
the stock market in general. You cannot invest directly in this index.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees,
expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed
and emerging countries included in the 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 longterm
bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold
price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars
per fine troy ounce.
* The Bloomberg 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 Total Return 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.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
* Stock investing involves risk including loss of principal.
Sources:
http://www.wsj.com/articles/ecb-announces-raft-of-new-measures-1457617839
http://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_other (Click
U.S. & Intl Recaps, then "Reaction then overreaction," and scroll down to chart) (or go to https://s3-us-west-
2.amazonaws.com/peakcontent/+Peak+Commentary/03-14-16_Barrons-Global_Stock_Market_RecapFootnote_2.pdf)
http://www.bloomberg.com/quote/FTSEMIB:IND
http://www.bloomberg.com/quote/IBEX:IND
http://www.reuters.com/article/us-global-markets-idUSKCN0WD027
http://www.barrons.com/articles/stocks-up-1-1-as-oil-rises-europe-eases-...?
mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-
14-16_Barrons-Stocks_Up_1.1_Percent_as_Oil_Rises_Europe_Eases-Footnote_6.pdf)
http://www.pwc.com/us/en/health-industries/behind-the-numbers/key-findin...
http://www.economist.com/news/economic-and-financial-indicators/21694506-output-prices-and-jobs (or go to
https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-14-16...)
http://www.pwc.com/us/en/health-industries/behind-the-numbers/cadillac-t...
http://www.pwc.com/us/en/health-industries/behind-the-numbers/virtual-ca...
http://managedhealthcareexecutive.modernmedicine.com/managed-healthcare-...
http://www.pwc.com/us/en/health-industries/behind-the-numbers/new-health...
http://www.pwc.com/us/en/health-industries/behind-the-numbers/high-cost-...
http://www.pwc.com/us/en/health-industries/behind-the-numbers/cyber-secu...
https://www.ebri.org/publications/notes/index.cfm?fa=notesDisp&content_i...
http://www.brainyquote.com/quotes/quotes/l/lyndonbjo103549.html?src=t_po...