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 17, 2019:
Nearly all markets across the globe declined last week as trade tensions between the US and China escalated significantly with the US threatening to enact further tariff increases on Chinese products that arrive in the US beginning June 1st. The S&P declined 0.69%, the NASDAQ dropped 1.22% and the Russell 2000 was down 2.32%. Overseas the international developed markets (MSCI EAFE) rose 0.23% while the emerging markets (MSCI EM) dropped 3.55%. With the US, the sectors more sensitive to falling interest rates – real estate and utilities – led performance, while financials and industrials showed the greatest declines. (1)
Bond prices rose as interest rates fell last week, with the benchmark 10-year US treasuries yield falling to 2.39%, down 8 basis points from the prior week and down 72 basis points on a year over year basis1 as concerns over the economic impact of US/China tariffs weigh on the expectations for US economic growth.
Oil prices rose 2% last week to $62.92 per barrel of West Texas crude. Year to date, oil prices have rebounded 35% to their November prices on expected supply limits from OPEC and due to sanctions on Iranian oil. However, prices remain well below the $75 peak of early October (2)
Retail sales for April were disappointing, with sales ex- volatile autos up a mere 0.1% vs. expectations of a 0.6% gain. After including vehicles, sales were down 0.2% vs. expectations of a 0.2% gain. The strength in March retail sales may have taken some of the sales out of April. (3) Meanwhile, the Philadelphia manufacturing business index nearly doubled in April, to 16.6 from 8.5 in March. Included in the reading is a decline in inventories, indicating positive sell through of manufactured goods. The report suggests continued growth for the region’s manufacturing sector with inflation in the 2.5% area. (4)
Proprietary portfolio happenings:
AT & T: (T), a G50 holding, reiterated guidance at investor conferences, reaffirming it EPS growth and free cash flow of $26B. Further, AT&T is planning a launch of a video-on-demand service in the fourth quarter, using Warner Media properties such as HBO and other programming. Shares were up 4% for the week.
Alibaba Group (BABA), a G33 holding, reported sales and operating profit growth of 51% and 42%, respectively, which exceeded expectations. Additionally, management raised revenue guidance for the current quarter. (6) Shares dropped 4.7% for the full week due to its focus on Chinese consumer for its revenues and the negative direction of US/Chinese trade talks last week.
Virtusa (VRTU), a G33 holding, reported revenues and earnings that were below expectations due to challenges in large banking clients, an issue that has driven volatility in earnings in recent results. However, the company continues to grow faster than its digital engineering and information technology consulting service peers. (7) Shares were down 17% for the week.
Did You Know?
The famed 45.52 carat Hope Diamond, after about 400 years of various private owners, was donated in 1958 by Harry Winston to the National Museum of Natural History. Rather than personally transporting the incredibly valuable diamond, Winston simply boxed it up and put it in the regular U.S. mail for $2.44 in postage and $155 in insurance. Four years later, the National Museum of Natural History lent the diamond to the Louvre Museum in Paris. Smithsonian mineralogist George Switzer put it in a pouch his wife made which was placed in his pants pocket. To help ensure it didn’t accidentally fall out of the pocket, he used a safety pin to secure the pouch inside the pocket.
Sources:(1) JP Morgan Weekly Market Recap 5/20/19, (2) Oilprices.com, (3) US Census Bureau 5/15/19, (4) Federal Reserve Bank of Philadelphia 5/16/19, (5) AT&T press release 5/14/19, (6) Alibaba Group investor relations 5/15/19, (7) Virtusa investor relations 5/19