Economic Market/Portfolio Happenings
Hello and welcome to this week’s Jones Financial Blog! Our goal at Jones & Associates is to help keep you up to date with interesting current economic/market happenings as well as some proprietary portfolio happenings. Knowledge is power and thought we would share some of ours with you. Enjoy!
All data is for the week ended April 12, 2019:
Markets were generally higher across the globe last week, with the S&P 500 up 0.56%, the Russell 2000 up 0.16% and the NASDAQ rising 0.58% while the Dow Jones was off 0.03%. Overseas markets were also generally positive, with developed markets (MASCI EAFE) up 0.30% and emerging markets (MSCI EM) gaining 0.41%. In the US, financials and communication services were the best performing sectors while health care and energy were the poorest performing sectors. (1)
Earnings reporting season has begun, and the banks and financial institutions that have reported so far have generally surprised to the upside. While growth estimates for the total market have been negative, we could see a positive surprise across the board based on the earliest reporting companies’ results.
Interest rates rose, with the benchmark 10-Year US treasuries yielding 2.56% on Friday, up 6 basis points for the year and up 15 basis points since month end as economic data has been generally positive since that time. (1) The Federal Open Market Committee minutes showed that the Federal Reserve’s decision in March to cease raising interest rates so far this year was driven by anxiety over the U.S. and global economies along with an inflation rate that was unexpectedly low. (2)
Oil prices moved higher last week, with West Texas crude closing at $63.89 per barrel, up 1.3% for the week and 41.50% year to date. (1) Better than expected production/exports out of China are the likely cause of last week’s gains.
China reported March export growth that far exceeded expectations. After slumping in February, exports rose 14% year over year versus expectations in the 8-9% range. Also last week the Chinese government said talks with the U.S. were making progress after nine rounds of negotiations. (3) Meanwhile the European Union Bank president said officials there now acknowledge that their economic slowdown will continue this year, leading to little chance of interest rate increases in the next several months.
The U.S. government ran a budget deficit of $147 billion in March which was 30% smaller than the deficit recorded in the same month a year ago. In March spending fell 10% with declines in most government programs – including defense, education and veterans’ affairs – and receipts rose 9%. (4)
U.S. inflation as measured by the consumer-price index rose 0.4% in March to mark the biggest rise in 14 months. Over the past year, the cost of living (excluding volatile food and energy prices) has increased 2.0%, in line with the Federal Reserve’s goal. (5) This report supports our view that the Fed is unlikely to raise rates significantly this year.
Parsley Energy (PE), Matador Resources (MTDR), EOG Resources (EOG) among other holdings in our Energy Sector Focus strategy, saw shares rise as a deal by Chevron to purchase Anadarko (6) sent energy stocks upward as hopes were sparked for other acquisitions across the shale oil sub-sector. PE finished the week up 8.0%, MTDR rose 7.2% and EOG gained 6.8%.
JP Morgan (JPM), a G50 and Core Select holding, reported earnings that were ahead of expectations. Loan growth of 5% was also a surprise during the quarter. Shares rose 5.6% for the week. (7)
The Walt Disney Company (DIS), a Core Select holding, hosted an analyst day that was well received by investors, in which management announced a Disney streaming service at $6.99 per month. Shares rose 13.1% for the week on the news. (8)
Did You Know...In 2019, Tax Freedom Day falls on April 16, or 105 days into the year. This is how long Americans, as a whole, have to work in order to pay their Federal, state and local taxes for the full year. This is down 5 days from 2017. Alaska has the earliest day at March 25th while New York has the latest at May 3rd.
Sources: (1) JP Morgan Weekly Market Recap 4/15/19, (2) Minutes of the Federal Open Market Committee, (3) US News, “China Exports Rise in March” 4/12/19, (4) US Department of the Treasury, (5) Bureau of Labor Statistics 4/10/19, (6) Chevron press release 4/12/19, (7) JP Morgan press release 4/12/19, (8) Disney press release 4/11/19