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 May 10, 2019:
US and overseas stocks opened sharply lower last Monday after President Trump responded to Chinese trade negotiators who apparently withdrew prior agreements. Trump threatened to raise tariffs on all Chinese imports to 25 per cent beginning on Friday, sharply ratcheting up pressure on the Chinese government to make concessions in trade talks and sending global equities markets sliding. With no tariff deal by Friday morning and prospects increasing for Chinese retaliation, the declines persisted. The S&P closed down 2.10% for the week, the Russell 2000 declined 2.52% and the NASDAQ dropped 2.96%. Every sector saw values decline. Overseas the international developed markets (MSCI EFA) were down 2.59% and emerging markets (MSCI EM) dropped 4.51%. (1) Note that trade talks are expected to resume soon in Beijing.
US Interest rates dropped, and bond values rose in response to the trade tariff news. The benchmark 10-year Treasuries finished the week with a 2.47% yield, down 7 basis points. (1) However, some investors look for tariffs to increase the odds of rising inflation and possibly increasing the likelihood of a rate hike.
Gold prices rose in response to the increased taxes on Chinese goods which pressured stocks. The price of gold (ETF: GLD) rose 0.65%, lifting year to date performance to 0.15%. (2) Note gold prices typically move in the opposite direction of stock prices, providing some downside protection or “insurance” to all-stock strategies.
US inflation (CPI) was reported at a 0.03% rate for April, slightly below expectations. When measured excluding volatile food and energy prices, core inflation rose just 0.1% in April, also slightly below expectations. (3) Meanwhile initial jobless claims in early May fell 2,000 to 228,000, which was ahead of estimates. (4) However, the more stable monthly average of new claims was 220,250. Note unemployment is at a 49-year low.
Proprietary portfolio happenings:
CME Group (CME), a G50 holding, rose 5% last week due to expected benefits from a higher volatility market for this financial services trading company.
Diamondback Energy (FANG), a Core Select, Energy Sector Focus and G33 holding, reported that the oil and natural gas exploration and development company had increased production and reduced their capital spending. (5) Shares advanced 7.4% for the week.
Insulet Corp. (PODD), a G33 holding, shares rose in response to strong earnings growth reported in the prior week and upgrades from Wall Street analysts. Management of this developer and manufacturer of insulin delivery systems for diabetics was encouraging with its description of its newest product, DASH. (6) Shares rose 6.7% for the week.
Sysco Corp. (SYY), a G50 holding, reported earnings that were well ahead of expectations including an operating profit that was higher than expected. (7) Shares of this foodservice distributor rose 5% for the week.
Did You Know?
While most cheetahs have spots, very rarely one will be born with stripes as well. A cheetah with this characteristic was first documented in 1926 by Major A. Cooper who spotted and killed said cheetah in modern day Zimbabwe. Since then these so called “king cheetahs” have been spotted in the wild just five times, although some have also been born in captivity.
Sources: (1) JP Morgan Weekly Market Recap 5/6/19, (2) Oilprice.com3 YouTube 5/1/19, (4) Bureau of Economic Analysis 4/29/19, (5) Mortgage Bankers Association, (6) Apple Inc. press release 4/30/19, (7) Cognizant Technology Solutions Corp. press release 5/2/19, (8) EOG Resources 5/2/19, (9) Leidos Holdings Inc. press release 4/30/19, (10) Paychex Inc. press release 5/3/19