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 September 6, 2019.
Global stocks advanced on Thursday, with US stocks pushing toward one-month highs, amid optimism of thawing geopolitical tensions after the US and China announced that they would resume trade negotiations in the coming weeks in Washington, DC. For the week the benchmark S&P rose 1.83%, the Russell 2000 advanced 0.71% and the NASDAQ increased 1.78%. Overseas markets were even more buoyed by the news, with emerging markets (MSCI EM) gaining 2.44% and international developed markets (MSCI EAFE) improving 2.23%. Consumer discretionary and energy were the best performing sectors in the US while health care and utilities lagged, although all sectors were up.
A renewed appetite for equities pulled investors away from the safety of government debt, sending yields higher and slightly steepening the yield curve. The benchmark 10-year Treasuries note added 5 basis points to yield 1.55% while the 2-year government note added 3 basis points to yield 1.53%. Meanwhile the 30- year Treasuries yield rose 6 basis points to 2.02%. (2)
West Texas Crude (WTI) prices rose 2.4% to $56.47 per barrel following a government report that inventories decreased by 4.8 million barrels from the previous week. (3) Additionally Baker Hughes reported drill rigs declined again, with North American oil rigs now down 122 over the past year indicating reduced production in the coming months. (4)
The manufacturing index slipped into contraction territory with a read of 49.1% for August vs. 51.2% in July, according to ISM. Any reading below 50% indicates contraction. New orders declined 3.6 points to 47.2%. Ahead of the tariffs instituted on September 1, inventory tightened and imports as well as exports contracted to new lows. (5)
August employment gains were disappointing, only up 130,000 as the labor market struggled to place qualified employees. This compares to the 159,000 jobs added in July. The unemployment rate remained at 3.7%. Average hourly wages grew a healthy 3.2% year over year to $28.11 per hour. (6)
Proprietary portfolio happenings:
Intel Corp. (INTC), a G50 and Core Select holding, shares rose along with other semiconductors in response to surveys indicating positive near term pricing and volume trends. This was compounded by news of renewed US/China trade negotiations since semiconductors are a trade-sensitive sector. Shares were up 7.4% for the week.
Skyworks Solutions (SWKS), a recent addition to the G50 portfolio, is a designer and manufacturer of semiconductor chips primarily for wireless connectivity. Secular growth of 5G technology is expected to become a material source of future growth, especially as Apple launches 5G phones in 2020. As another trade-sensitive holding, shares ramped higher last week on reports that the US and China agreed to return to the negotiating table. Shares rose 6.1% for the week.
Target Corp. (TGT), a G50 holding, flexed its considerable muscle with hundreds of suppliers of Chinese-produced goods, telling them in a letter that Target will refuse to “accept any cost increases related to tariffs” imposed by the US in its trade war with China. The company wrote, “Our expectation is that you will develop the appropriate contingency plans so that we don’t have to pass price increases along” to customers.7 Shares rose 2.6% for the week.
Teledoc (TDOC), a G33 holding, initiated its national partnership with UnitedHealthcare (UNH), a Core Select holding, with their Virtual Visits telemedicine program. Since its launch on a smaller scale two years ago, United Healthcare said its telemedicine program has delivered $11 million in savings and could provide up to an estimated $6 billion in annual savings.8 Shares of Teledoc gained 7.7% for the week.
Did You Know? Queen Elizabeth technically doesn’t need – nor does she hold – a passport since all British passports are issued in the queen’s name. Since Queen Elizabeth does not have a passport (nor does she generally carry around picture ID) her trips are cleared with the various state departments before she arrives. In this way, the queen does not have issues with customs officials and her lack of passport. All the other members of the British royal family are required to carry a passport on them when they travel abroad.
Sources: (1) JP Morgan Weekly Market Recap 9-9-19, (2) US Treasury, (3) Energy Information Adm. Weekly Petroleum Report 9-3-19, (4) Baker Hughes North American Rig Count 9-6-19, (5) Institute for Supply Management 9-3-19, (6) US Bureau of Labor Statistics 9-6-19, (7) Wall Street Journal, “Target Tells Its Suppliers to Handle Tariffs Costs” 9-4-19, (8) United Healthcare press release 9-4-19