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 November 22, 2019.
Global markets posted a small decline last week, with the benchmark S&P 500 falling 0.29%, the Russell 2000 down 0.45% and the NASDAQ declining 0.20%. Overseas, the international developed markets (MSCI EAFE) dropped 0.57% as the emerging markets (MSCI EM) were off 0.01%. In the US, health care and financials were the best performing sectors while real estate and materials lagged the markets.
Interest rates fell and fixed income values rose, with the benchmark 10-year US Treasuries ending the week with a 1.77% yield, down 7 basis points. (1) Bond-fund inflows for the year have totaled $129.2 billion for U.S. fixed-income ETFs and $17.1 billion for international fixed-income ETFs, according to ETF.com. If 2019 ended now, those flow numbers would represent the largest for fixed-income ETFs in any calendar year. (2)
The Energy Information Administration reported US crude oil supplies rose 1.4 barrels for the week ended Nov. 15, continuing increases for each of the last four weeks. The report, however, showed a bit smaller gain than the 1.6 million-barrel rise expected by analysts. West Texas crude prices were virtually flat for the week. (3)
Consumer confidence for November was above expectations and in line with the average recorded for the index since the start of 2017 (about 97) and posted its third consecutive monthly gain. Consumers said they expected inflation, unemployment and interest rates to remain at very favorable levels in the year ahead. When asked to assess their current finances, 54% of all households reported that their finances had recently improved, a near-record. (4)
October housing starts rose 8.5% year over year, slightly below consensus estimates. Permits, a leading indicator, rose 14.1% year over year which was well ahead of consensus. (5)
Existing home sales (90% of the total) were reported in line with the consensus estimate of 5.5 million, up 4.6% year over year with prices up 6.2% (the best gain since June ’17) and inventory down 4.3%. Pricing is likely to remain strong since there is less than 4 months of inventory at the current sales rate. (6)
The Architectural Billings Index rose to 52.0 in October, the best level since January, a positive development for commercial real estate construction driven by the Midwest and South. A level above 50 indicates expansion; this is the first gain above 50 in three months. The Billings Index leads commercial construction activity by 9 to 12 months.
Proprietary portfolio happenings:
Home Depot (HD), a Core Select holding, shares declined 8.1% last week following a report that earnings were in line with expectations despite a slight shortfall in revenue growth. (7) In addition, management gave unimpressive guidance versus high expectations for the upcoming quarter.
Merck (MRK), a Core Select and G50 holding, boosted its dividend by 11%. Yield on the new rate is 2.85%.
ServiceNow Inc. (NOW), a G33 holding, rose 7.7% following an announcement that the company will become a component of the S&P 500 index. Many portfolios that track the S&P will be adding this name as a result.
Target Corp. (TGT), a G50 holding, rose 12.2% following their quarterly report of revenues and earnings that were well ahead of expectations. Management reported 4.5% growth in comparable-store sales and digital sales growth of 31% with better than expected cost controls.
Did You Know? When the Pilgrims left England to avoid religious persecution within the English state church they first went to Leiden, Holland. However, they had a hard time fitting in and finding jobs because they didn’t want to assimilate into the local culture. They secured investors and made their journey to create a colony in New England.
Sources: (1) JP Morgan Weekly Market Recap 11-25-19, (2) Barron’s 11-20-193 Energy Information Administration 11-20-19, (4) University of Michigan 11-22-19, (5) US Census 11-19-19, (6_ National Association of Realtors 11-21-19, (7) Home Depot press release 11-19-19, (8) Merck press release 11-19-19, (9) S&P Dow Jones Indices press release 11-18-19, (10) Target Corp. press release 11-20-19