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 April 17, 2020.
The U.S. and overseas stock indices were generally higher after President Trump proposed plans to reopen the U.S. economy in stages. The S&P 500 rose 3.06%, the Russell 2000 declined 1.40% and the NASDAQ jumped 6.09%. International developed markets (MSCI EAFE) added 0.98% while emerging markets (MSCI EM) rose 1.58%. Growth stocks outperformed value stocks. The best performing sectors were consumer discretionary and health care, while financials and real estate were the laggards. (1)
Interest rates dropped as values rose across most issuers and most maturities, with the benchmark 10-year Treasuries down 8 basis points to 0.65%. (1) Credit spreads, or the difference between government bonds and high yield (junk) bonds recently peaked at 10.89%. On Friday the spread was 7.31%, a decline of 358 basis points. (2)
The May futures contract for WTI oil prices dropped this week by 20.4% to $18.12 per barrel despite a landmark U.S.-backed deal by the OPEC+ producers to cut production by almost 10%. (3) Be aware, the May contract expires on Tuesday (4.21.2020) and the June contract is priced higher. However, the decline in demand has been even greater than the production cuts due to the global coronavirus. Meanwhile pricing for contracts of future summer oil deliveries have risen dramatically versus current spot prices, creating a “super contango” for oil.
March retail sales fell 8.7% from the previous month, and 6.2% below March 2019. Food and beverage stores were up 28.0% year-over-year, while restaurants & drinking places were down 26.5% and clothing & accessories stores were down 50.7% for the month. For the first quarter, total sales were up 1.1% year-over-year. (4)
U.S. industrial production fell 5.4% in March from the previous month, led by a 28% drop in vehicles and parts. This broad measure of factories, mines and utilities output experienced its worst performance since 1946. (5)
These reports showed how the COVID-19 pandemic has cut into Americans’ spending habits since mid-March, when social distancing rules were imposed, and we began to lose jobs in record numbers. Last week an additional 5.2 million people filed for unemployment insurance, bringing the four week total to 22 million. (1)
China’s economy shrank 6.8% in the first quarter, the first decline in 44 years after the coronavirus pandemic ended an era of uninterrupted growth. Their government described it as a short term shock and forecasted 5% average annual growth for the next two years. Independent measures of key economic activity have shown improvement since early March. (6)
Proprietary portfolio happenings:
Abbott Laboratories (ABT), a Core Select holding, announced the launch of its third test for the coronavirus and said it could be screening 20 million people for COVID-19 infection, previous or current, by June. The 13-minute test can be administered at sites outside of a lab. Abbott also announced quarterly revenues and earnings that exceeded expectations. Shares rose 11.6%% for the week. (7)
Johnson & Johnson (JNJ), a G50 holding, reported first-quarter sales and profits that rose above expectations and boosted its dividend by 6.3%. Management lowered their full year sales and earnings forecasts due to the effects of COVID-19. Shares rose 7.6% for the week. (8)
Procter & Gamble (PG), a Core Select holding, declared a 6% dividend increase and announced quarterly earnings that beat expectations. Guidance for their June fiscal year was unchanged. Shares rose 8.7% for the week. (9)
Did You Know? Q is the only letter that doesn't appear in any U.S. state name? What state do you live in? Does it have a Q in the name? We can guarantee that it doesn't because that's the only letter that doesn't appear in any U.S. state name, from Alabama to Wyoming and everything in between.
Sources: (1) JP Morgan Weekly Market Recap 4-20-20, (2) Federal Reserve Bank of St. Louis 4-18-20M, (3) Oilprice.com 4-17-20, (4) US Census Monthly Retail Sales 4-14-20, (5) Federal Reserve Release 4-15-20, (6) Financial Times, “China’s Economy Shrinks for First Time in Four Decades” 4-17-20, (7) Abbott Labs press release 4-16-20, (8) Johnson & Johnson press release 4-14-20, (9) Procter & Gamble press release 4-17-20