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 29, 2019.
Better than expected US growth (see Economic Data below) propelled domestic stocks higher in the shortened trading week. The S&P 500 rose 1.04% while the Russell 2000 (benefiting from their larger exposure to small cap stocks) climbed 2.28%, and the NASDAQ gained 1.72%. Overseas, international developed markets (MSCI EAFE) edged up 0.52% and emerging markets (MSCI EM) declined 0.80%. Within the US, consumer discretionary and technology stocks led the indices while energy and utilities were the lagging sectors.
Interest rates and bond values were virtually flat last week across all the government maturities. Year to date, the yield on the benchmark 10-year Treasuries is down 91 basis points, driving their value up 9.40% since the start of 2019. (1)
Oil prices fell last week after Iraq’s prime minister resigned, increasing the likelihood that the country will restore its production, thus raising global supplies. West Texas crude ended the week at $55.17 per barrel, down 4.5% for the week. (2)
The US economy grew at a 2.1% annualized rate in the third quarter, up from the initial estimate of 1.9% and at a slightly faster pace than the prior quarter. (3) With the new estimate we also saw a larger than expected rebound in durable goods orders in October. This should help calm worries about future economic growth, which has been under pressure from the tariff war with China.
Durable goods orders for October rose 0.6% month-over-month, ahead of expectations and now up four of the last five months. This follows a 1.4% decrease in September. Shipments also rose following three consecutive monthly decreases, which is encouraging for the current economy. (4)
The Misery Index has reached a four year low. This is the sum of the unemployment rate plus the inflation rate (currently 3.6% + 1.8% = 5.4%). The peak occurred during 1980 when it reached 22.0%. Market valuations or the forward price/earnings ratio for the S&P 500 are highly correlated with the Misery Index inversely—the lower the misery, the higher the valuations for the stock market. (5)
Proprietary portfolio happenings:
Alibaba (BABA), a G33 holding, shares rose 7% following a blockbuster listing in Hong Kong last week in which the company raised at least $12 billion. The offering was the year’s biggest globally and showed confidence in Hong Kong despite months of political unrest. (6)
Did You Know? In 1934, Danish carpenter Ole Kirk Kristiansen, the founder of what we now know of as Lego®, asked his staff to come up with a good name for his growing toy company. The two names that ended up being finalists were “Legio” (referencing legion as in “legion of toys”) and “Lego”, a contraction of “leg godt” which is a Danish phrase meaning “play well”. Lego® is a fitting name since it is also a Latin word meaning “to gather or collect” given what their most popular product ended up later being.
Sources: (1) JP Morgan Weekly Market Recap 12-2-19, (2) Oilprice.com, (3) Bureau of Economic Advisors 11-27-19, (4) Census Bureau 11-27-19, (5) Yardeni Research Misery Index 11-29-19, (6) Seekingalpha.com 11-25-19