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 February 29, 2020.
Coronavirus worries – physical and economic – drive markets down dramatically last week with the S&P 500 declining 11.44%, the Russell 2000 down 12.01% and the NASDAQ off 10.52%. Overseas markets were similarly affected with the international developed markets down 9.55% and emerging markets (MSCI EM) falling 7.23%. All sectors in the US dropped with energy and financials hardest hit, down mid-teens. (1) So far only a handful of companies have announced earnings guidance to include impacts from COVID-19. We remind investors that the overall impact to corporate earnings (and more importantly earnings power) is likely transitory.
Bond prices rose as yields dropped on economic fears as a result of COVID-19, with the benchmark 10-year US Treasuries ending at 1.13%, down 33 basis points to the market. Since the start of the year, those rates have dropped 75 basis points without any action by the Federal Reserve. (1)
Oil had one of its worst weeks since the 2009 financial crisis as West Texas crude fell to $45.23 per barrel, down 15.3% for the week. (2) It appears to be rebounding sharply this morning on hopes that OPEC will announce production cutbacks at their meeting this week. (3)
Gold (GLDM), an Endowment Series and Precious Metals holding, after reaching a seven-year high last Monday, was subjected to major profit taking in order to generate cash to cover margin calls in other markets. The precious metal had done well until the last three days and ended the week down 4.02%. (4)
Durable goods orders excluding transportation and defense, a key indicator of manufacturing, rose in January by 0.9%. Additionally, business investment rose 1.1%. Because of the spread of the coronavirus, however, these numbers are likely to decline in the coming months as plant closings to contain the virus impact manufacturing. (5)
Consumer spending increased 0.2% last month versus December while incomes added 0.6%, the biggest gain in 11 months. Core inflation (personal consumption expenditures prices excluding food and energy) rose 1.6% on a year-over-year basis, a slight acceleration from the prior month. This is slightly below the Federal Reserve’s targeted inflation rate of 2.0%. (6)
Proprietary portfolio happenings:
Delta Air Lines, Inc. (DAL) – a G50 and Core Select holding—and Royal Caribbean (RCL) (a Core Select holding), declined over 20% last week on worries about the impact of the coronavirus on the travel industry. (7)
FLIR Systems Inc. (FLIR), a Core Select holding, reported revenues and earnings that disappointed and guidance was also disappointing. (8) Shares declined 27.2% for the week.
Teledoc (TDOC), a G33 holding, reported revenues and earnings that exceeded expectations and management offered solid guidance. (9) This provider of virtual health care has been gaining interest as the concept of online patient care is growing more attractive in the age of coronavirus. Shares rose 10.1% for the week.
Did You Know? Did you know the longest place name in the world is 85 letters long?Unfortunately, this is one of the did you know facts you probably can't repeat to your friends—and that's because it's nearly impossible to pronounce. Taumatawhakatangihangakoauauotamateaturipukakapikimaungahoronukupokaiwhenuakit-anatahu is in New Zealand and is 85 letters long.
Sources: (1) JP Morgan Weekly Market Recap 3-2-20, (2) Wall Street Journal 2-28-20 “Oil Has Its Worst Week…”, (3) MarketWatch 3-2-20 “Oil rebounds sharply as traders pin hopes on OPEC cuts this week”, (4) Yahoo Finance 3-1-20, (5) NASDAQ 2-27-20 “US Durable Goods Orders…”, (6)Bureau of Economic Analysis 2-28-20, (7) Seeking Alpha, (8) FLIR investor relations 2-27-20, (9) Teledoc press release 2-26-20