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 March 13, 2020.
The US stock market ended a tumultuous week with a 9.3% gain on Friday after the president announced a national emergency plan to combat the effects of coronavirus. For the week, the S&P 500 lost 8.73% as the Russell 200 dropped 16.44% and the NASDAQ fell 8.14%. Overseas, the international developed markets (MSCI EAFE) dropped 18.36% while emerging markets (MSCI EM) fell 11.92%. All sectors experienced drops with the energy sector down 24.1%, still reeling from the price war between Saudi Arabia and Russia.
On Sunday, the Federal Reserve lowered its benchmark fed funds rate by 100 basis points to a range of zero-0.25% and expanded its bond repurchase program to at least $700 billion, restarting the quantitative easing program in an effort to ensure financial markets are stable, functional and credit is flowing. This was the second Fed cut to interest rates in the last two weeks and the first time the rate has been this low since 2008. (2)
Oil prices jumped on Friday afternoon following the president’s announcement that the U.S. will buy large quantities of crude-oil, after the price war between Saudi Arabia and Russia sparked a plunge in the price of oil which endangered the balance sheet of shale oil producing companies.
However, prices were down for the week by 23.1%, closing at $31.73 per barrel.3Gold (GLDM), a holding in our Endowment Series and Precious Metals strategies, fell 9.0% last week for its worst week in nine years as investors cashed in on this highly liquid asset, partly to cover losses in their margin accounts. (4)
The University of Michigan consumer sentiment index came in at 95.9, a touch better than forecasted but down from 101 in the prior survey. The expectations portion of this index dropped from 92.1 to 85.3, about 3 points lower than consensus estimates. (5)
Inflation appeared well under control in February although the report did not include any influence from the coronavirus. The consumer price index edged up 0.1% from the prior month or 2.3% on a year-over-year basis, down slightly from the prior month’s report. (6)
Proprietary portfolio happenings:
Digital Realty Trust (DLR), a G50 holding, rose 11.2% last week as the data center real estate investment trust announced it had been cleared to complete the acquisition of Interxion (ITXN) which includes subsea cable routes to Asia, Australia and New Zealand from the Pacific Northwest. (7)
Energy stocks in the G33, G40i, G50, Core Select and Energy Sector Focus strategies were down 20-60% last week alone following the Saudi’s decision to increase production and lower prices in an effort to gain market share during a period of lower demand. (8)
Did You Know? Happy Pi Day! If you multiply Pi (3.14…) by the radius squared to find the area and multiply area by height to find the volume, that means the volume of a pizza that has a nominal radius of (z) and height (a) will be: Pi × z × z × a.
Sources: (1) JP Morgan Weekly Market Recap 3-16-20, (2) Forbes.com “Will The Fed’s Sudden Move Usher in Even Lower Mortgage Rates?” 3-16-20, (3) Oilprice.com, (4) Marketwatch.com “Gold Futures Log Largest Weekly Loss in More Than 8 Years 3-13-20, (5) University of Michigan Surveys of Consumers 3-13-20, (6) US Bureau of Labor Statistics 3-11-20, I(7) Digital Realty Trust Investor Presentation 3-13-20, (8) Seekingalpha.com