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 27, 2020.
Stocks around the world rebounded strongly on news that the U.S. Congress and the president had agreed to a massive fiscal stimulus program to try to offset the economic impact of COVID-19. The bill calls for over $2 trillion in relief to individuals and companies both large and small. The broad U.S. market (S&P 500) rose 10.28% for the week while the Russell 2000 added 11.68% and the NASDAQ increased 9.06%. Overseas, the developed markets (MSCI EAFE) increased 11.23% while emerging markets (MSCI EM) rose 4.95%. Utilities, industrials and real estate were the best performing sectors in the U.S. while staples and communications lagged, although they also showed gains. (1)
Interest rates fell as bond values rose, with the benchmark 10-year treasury ending the week with a 0.72% annual interest rate, down 20 basis points for the week and 120 basis points year-to-date. (1)
The bigger news was in corporate bonds where, following a 3-week selloff, the federal fiscal stimulus package included a $500 billion allocation to support bond prices through added liquidity. It also allocated $4.5 trillion to back fixed income securities with guarantees.2 The high yield Bloomberg Barclays bond ETF issued by State Street (JNK) rose 9.55% for the week. (3)
Gold, a holding in the Endowment Series and Precious Metals strategies, rose 11.4% last week. (4) Demand has been strong due to investment buyers and central banks which are adding the yellow metal. Also, production is on hold for many gold miners due to the closure of one-third the global refining capacity as a result of the coronavirus.
New unemployment claims skyrocketed for the week ended March 12 to 3.283 million, twice the average number that economists had expected, as a result of the coronavirus. The record was 695,000 back in 1982. The prior week’s new claims count was 282,000. (5)
Consumer sentiment dropped to 89.1 from 101.0 in February according to the University of Michigan. This is the lowest reading since October 2016 when oil prices were plunging and the largest monthly drop in the index since October 2008 – at the height of the financial crisis. (5)
Proprietary portfolio happenings:
Real estate investment trust (REIT) ETFs including VanEck Mortgage REITs (MORT) in the Absolute Yield portfolio and Nuveen Short Term REITs (NURE) along with self-storage REITs such as G50 holdings Extra Space Storage (EXR) and Public Storage (PSA) were relative outperformers last week as investors perceived more stable revenue streams following the fiscal stimulus combined with a high relative dividend yield.
Did You Know? There are actually two Air Force Ones? Every vehicle needs maintenance to stay in tip-top shape, especially if it's expected to transport a country's leader around the world. So when Air Force One's SAM 28000 Boeing 747-200B plane is getting a tuneup, there's an identical SAM 29000 standing by. One plane is always ready for the president's use whenever needed.
Sources: (1) JP Morgan Weekly Market Recap 3-30-20, (2) Finance.Yahoo.com, (3) Marketwatch.com “How the Fed is Funneling $4 Trillion” 3-27-20, (4) APMEX 3-30-20, (5) US Department of Labor Weekly Claims 3-26-20, (6) University of Michigan Consumer Sentiment Surveys 3-27-20, (7) US Department of Labor 3/26/20, (8) SeekingAlpha.com