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 June 12, 2020.
Stocks gave back much of their gains from the prior two weeks on fears of a major second wave of Covid-19. The S&P 500 was down 4.73%, the Russell 2000 lost 7.89% and the NASDAQ slid 2.27%. Overseas markets saw similar results, with the international developed markets (MSCI EAFE) down 4.21% and emerging markets (MSCI EM) edging down 1.52%. Within the U.S., small-cap value stocks were the worst performers along with the energy and financial sectors while technology and communications services were the best performing sectors although still declining. (1)
The Federal Reserve decided on Wednesday to hold interest rates steady at near-zero, signaling its intention to support a post-COVID economic recovery by keeping rates at the lower end of the 1.00-0.25% range through at least 2022. The Fed also committed to increasing its asset purchases over the coming months, unsure of the recovery since the worst impact of Covid-19. (2) Benchmark 10-year U.S. treasuries ended the week with a 0.71% annualized yield, down 20 basis points for the week. (1)
The U.S. Energy Information Administration raised its 2020 forecast for crude oil prices and lowered its expectations for U.S. crude-oil production. It pegged its 2020 oil price forecast at $35.14 a barrel for West Texas intermediate, up 16.7% from its May forecast but below current pricing. (3) Meanwhile, crude inventories rose to a record high. (4) West Texas crude contracts for July delivery closed Friday at $36.26 per barrel, down 8% for the week. (1)
Inflation at the producer level rose a surprising 0.4% in May, the first gain in four months, and following a 1.3% drop in the prior month. Most of the gain is attributed to food and energy costs which rose 6% and 4.5%, respectively. The hike in May could be the beginning of more inflation in the coming months following deflation in the months most affected by the pandemic. (5)
New weekly jobless claims continued to trend lower, although rising by 1.5 million, implying recovery in the labor market since the worst numbers in late March. The total number of people claiming benefits in all government programs was 29.5 million, a decrease of 662,000 from the previous weeks. (6)
Proprietary portfolio happenings:
AbbVie (ABBV), a G50 holding, announced positive results from a study of its drug to treat adults with moderate-to-severe rheumatoid arthritis (RA). Further studies are being initiated. (7)
Eli Lilly & Co. (LLY), a G50 holding, received government approval to test at the phase 3 level its rheumatoid arthritis (RA) drug in hospitalized COVID-19 patients. The trial will enroll approximately 400 participants across sites in the U.S., Europe, and Latin America. (8)
Target Corp. (TGT), a G50 and Core Select holding, increased its dividend by 3%. Yield on the new rate for this general merchandise retailer is 2.32%. (9)
Did You Know? Early politicians required feedback from the general population to determine what the people considered important. Since there were no telephones, TV's, radios or internet, politicians sent their assistants to local taverns, pubs, and bars. They were told to “Go sip some ale, and listen to people's conversations and political concerns.” The two words “go sip” eventually combined when referring to the local opinion and, thus we have the term 'gossip.'
Sources: (1) JP Morgan Weekly Market Recap 6-15-20, (2) Federal Reserve Open Market Committee 6-10-20, (3) US Energy Information Administration 6-9-20, (4) US Energy Information Administration 6-11-20, (5) Bureau of Labor Statistics 6-11-20, (6) US Department of Labor 6-11-20, (7) AbbVie press release 6-10-20, (8) Eli Lilly & Co. press release 6-15-20, (9) Target Corp. press release 6-11-20