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 January 31, 2020
Equities declined around the globe due to fears of the Chinese coronavirus and its impact on global economic growth. The S&P 500 dropped 2.10%, the Russell 2000 declined 2.89% and the NASDAQ lost 1.75%. International developed markets (MSCI EAFE) lost 2.50% while the epicenter of the illness, emerging markets (MSCI EM), fell 5.09%. Within the US, utilities and consumer discretionary were the best performing sectors while materials and energy were the poorest performers. (1)
Interest rates dropped on fears of a slowing global economy, with the benchmark 10-year Treasuries rate dropping 19 basis points to 1.51%. (1) At its first policy meeting for the year, the Federal Reserve stood pat on interest rates and chairman Jay Powell characterized the economy as “in a good place”. The central bank cut interest rates three times in 2019 and indicated last year it would probably leave its benchmark borrowing rate unchanged this year.
The 30-year fixed-rate mortgage averaged 3.51% during the week ending Jan. 30, down 9 basis points for the week and nearly a full percentage point lower than a year ago, following the direction of the US Treasury note.
Gold (GLDM), an Endowment Series and Precious Metals holding, saw prices rose to their highest levels since early 2013. Global holdings in gold-backed ETFs have more than doubled since 2015 to a total of $141 billion. Negative bond yields overseas together with the 2nd highest level of buying by central banks in 50 years have been key drivers of rising gold prices. (4)
Gross domestic product rose at a 2.1 percent annualized rate in the last quarter of 2019, matching consensus estimates and even with the prior quarter growth rate. Imports dropped 8.7% from the prior quarter after rising to beat the increase in tariffs on Chinese goods that went into effect in September. (5)
New orders for durable goods—products designed to last at least three years—rose 2.4% in December from the previous month. The increase was driven by defense orders during a month when Congress approved an increase to military spending. This marked a reversal from the 3% drop in the prior month. (6)
Proprietary portfolio happenings:
AJ Gallagher (AJG), a G50 holding, reported earnings that beat expectations and noted that momentum in the insurance broker was continuing. Shares rose 6% for the week.
Chevron Corp. (CVX), a G50 and Core Select holding, announced an 8.4% dividend hike, marking its 33rd consecutive year of dividend increases. The stock yields 3.2% on the new rate. (7)
ServiceNow (NOW), a G33 holding, beat revenue and earnings expectations including 35% growth in last quarter’s subscription revenue for this cloud workflow company. Management also guided 2020 revenue growth to 30%, ahead of consensus estimates. Shares rose 9% on the report.
Did You Know? The fountain used in the filming of the “Friends” credit sequence, commonly believed to be located in New York City’s Central Park, is actually located at the other end of the country. The fountain is in Burbank, CA, in the back lot of a studio known as the Warner Brothers Ranch. The fountain has never been located in New York.
Sources: (1) JP Morgan Weekly Market Recap 2/3/20, (2) Federal Reserve Board statement 1-29-20, (3) Freddie Mac 1-30-20, (4) World Gold Council 1-30-20, (5) Bureau of Economic Analysis 1-30-20, (6) US Census Bureau 1-28-20, (7) AJ Gallagher press release 1-30-20, (8) Chevron investor relations 1-29-20, (9) ServiceNow investor relations 1-29-20