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 June 7, 2019.
US stocks rebounded last Tuesday from recent declines as Chinese officials called for talks to resolve issues with the U.S., “mutual respect, equality and mutual benefit” and Mexico’s foreign minister said his country was ready for negotiations with the U.S., expecting to find mutual understanding. Optimism grew throughout the week that Mexico would agree to curbs on migration into the US, averting tariffs on their goods. A deal with Mexico was announced late on Friday, avoiding tariffs that would have gone into effect on Monday.The S&P rose 4.46% for the week, with the NASDAQ also rising very strongly, up 3.91%, and the Russell up 3.36%. Overseas the developed markets (MSCI EAFE) rose 3.24% while emerging markets (MSCI EM) were up 1.04%. Within the US the materials and technology sectors were the best performers while real estate and communication services were the worst performers although still recording gains. (1)
With concerns of a slowing global economy and increasing volatility, a focus on income has been driving bond prices higher and interest rates lower. The benchmark 10-year Treasuries closed the week at a 2.09% yield, down 5 basis points for the week and down 57 basis points year to date. (2)
West Texas Crude oil prices saw a rise of 0.92% to $53.94 per barrel (1), sparking a rally for the broader energy sector of 4.25%. Large integrated companies such as Exxon Mobil (XOM) and Chevron (CVX)—both holdings in the G50, Core Select and Energy Sector strategies – led the way with weekly returns of 5.38% and 6.70%, respectively. (3)
Friday’s jobs US report was disappointing, with a small 75,000 payroll gain for May and large downward revisions to prior months. However, widespread flooding may have accounted for more than half of the decline in May, and the unemployment rate remained at a very low 3.6% (4) which is encouraging for economic growth.
The global purchasing manager index surveys signaled that manufacturing downshifted into contraction during May. Business conditions deteriorated as production volumes stagnated and new orders declined at the fastest pace in 7 years. Business optimism fell for the second month in a row (5), likely due to uncertainty around tariffs
Proprietary portfolio happenings:
Cracker Barrel (CBRL), a G50 holding, reported sales that were ahead of expectations and announced a special $3 per share dividend as the board increased the regular dividend by 4%. They also reiterated sales and earnings growth guidance for the full year. Shares rose 4% for the week. (6)
Salesforce (CRM), a G33 and Core Select holding, announced the acquisition of Tableau Software (DATA) in a stock deal valued at $16 billion. (7) The deal will add $300 million-$400 million to CRM’s estimated revenue of $13 billion in the current year.
Sanofi (SNY), a G401 holding, appointed the former pharmaceuticals divisional president at Novartis AG (NVS) – also a G40i holding - to become chief executive officer at the French drug company, replacing the current CEO who will retire in September. Shares of SNY rose 9% for the week since he comes with the reputation as a solid manager with expertise in digital relating to pharmaceuticals. (3)
Did You Know?
From 1912 to 1948, art was an official Olympic event. Submissions had to be in the categories of architecture, literature, music, painting, or sculpture, and inspired by sports. The art also had to be original works never seen publicly before submission to the Olympics. The winning artists were awarded medals the same as other Olympians. Art was removed as a judged event from the Olympic games after a report showed that almost all the contestants who submitted works to the Olympics were professionals.
Sources: (1) JP Morgan Weekly Market Recap 6/10/19, (2) US Treasury Daily Treasury Yield, (3) Seeking Alpha, (4) US Bureau of Labor Statistics 6/7/19, (5) JP Morgan Global Manufacturing PMI 6/3/19, (6) Cracker Barrel press release 6/4/19, (7) Salesforce press release 6/10/19