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 21, 2019.
Key US market indices reached or neared all-time highs last Thursday. The S&P closed the week up 2.20% to close at 2,950 and the Dow Jones rose 2.41% to close at 26,719 after the Federal Reserve left the federal funds rate unchanged. Overseas markets also reacted positively to the news as indications that US-China trade could improve during upcoming meetings at the G20 summit this week. Emerging markets (MSCI EM) jumped 3.84% while international developed markets rose 2.22%. Within the US the energy and tech sectors were the strongest performers; consumer staples and materials were the weakest, although still up.
The Federal Reserve kept overnight borrowing interest rates at the 2.25-2.50% range, and said it will act “as appropriate” to sustain economic expansion. They removed the word “patient” from their commentary in describing their willingness to lower borrowing costs. Half the board members projected lower rates over the balance of 2019 although most wanted to see more indicators of economic activity before changing rates. Interest rates declined slightly immediately after the report and the benchmark 10-Year US treasuries finished the week with a 2.07% yield, down 2 basis points.
Oil prices rose 9.2% to $57.35 per barrel for West Texas crude reflecting the military conflict threat in the Persian Gulf after an unmanned US drone was shot down by Iran over international waters on Thursday. As compared with prior military attacks in the region, oil prices have been relatively stable after this attack due to increasing supplies from North America and recent easing of demand. (1)
Gold futures climbed above $1,400 an ounce Friday for the first time since 2013 as investors continued to bet on easier monetary policy from the Federal Reserve and other central banks. Gold (ETF: IAU), an Endowment Series and Precious Metals strategy holding, ended the week at $1,397. The ETF was up 4.4% for the week and up 8.9% year to date as the US dollar weakened to overseas currencies. Silver (ETF: SIVR), also a Precious Metals holding, saw its highest prices in three months, and finished the week up 3.05%. The silver ETF is down 1.06% year-to-date. (3)
Both the New York state and Philadelphia area region of the Federal Reserve reported manufacturing indices for June that were below expectations. We believe the numbers reflect customers’ concerns around tariff-related costs. While the numbers declined month over month, sentiment from the Philly survey indicated optimism for the third quarter. (4)
Existing home sales for May rose at a rate that was double that expected, 2.5% vs. consensus 1.2%, with sales aided by lower mortgage interest rates in recent weeks. Average prices rose 4.8%, the largest year over year gain since last summer. Inventory of unsold homes remained near historic lows at 4.3 months; 6 months of inventory is considered balanced. (5)
Proprietary portfolio happenings:
Adobe (ADBE), a Core Select and G33 holding, reported very strong quarterly revenues and earnings that exceeded expectations and reiterated full year guidance. (6) Most Wall Street analysts raised their target price. Shares rose 9.1% for the week.
Darden Restaurants Inc. (DRI), a G50 holding, reported earnings that exceeded expectations and announced a 17% dividend hike. Yield on the new rate is 2.90%. (7)
Medtronic (MDT), a Core Select and G50 holding, announced an 8% dividend increase, marking the 42nd year of higher dividends. Yield on the new rate is 2.17%. (8)
Visa (V), a Core Select and G33 holding, announced it had helped financial institutions prevent an estimated $25 billion in annual fraud utilizing artificial intelligence. (9)
Did You Know?
Humpty Dumpty was originally a powerful cannon – not an egg – that was used in the Siege of Colchester during the English Civil War. In the summer of 1648, Humpty Dumpty was mounted on the peak of a wall in front of St Mary’s Church there to protect the city against attack. The church tower was hit by enemy cannon fire, and the top of the tower was blown off, causing Humpty Dumpty to “have a great fall”. Colchester was a royalist stronghold, meaning all the king’s horses and all the king’s men tried to put Humpty Dumpty back together again (but to no avail).
Sources: (1) JP Morgan Weekly Market Recap 6/24/19, (2) Federal Reserve FOMC Statement 6/19/19, (3) Morningstar.com, (4) Marketwatch.com 6/20/19, (5) National Association of Realtors 6/21/19, (6) Adobe press release 6/18/19, (7) Darden Restaurants press release 6/20/19, (8) Medtronic press release 6/21/19, (9) Visa Inc. press release 6/17/19