Economic Market/Portfolio Happenings
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 26, 2020.
Stocks declined globally as the risk to a global recovery increased with the rising number of Covid-19 cases and areas of the US paused or reversed their re-openings and increased social distancing rules. The S&P 500 dropped 2.86%, the Russell 2000 declined 2.80% and the NASDAQ decreased 1.90%. Overseas fared slightly better but the international developed markets (MSCI EAFE) still lost 1.29% while the emerging markets (MSCI EM) were down 0.14%. (1)
Bank stocks got hit hard on Friday after the Federal Reserve’s stress test results showed some institutions could get close to minimum capital levels in scenarios related to the coronavirus pandemic. (see Company News below). Also, those companies most beaten down by the pandemic such as airlines, casinos, cruises and real estate sold off on news that Covid-19 cases were accelerating in Florida, Texas and some smaller southern states.
Interest rates moved down and bond values rose in response to slowing growth. The International Monetary Fund reduced its 2020 global economic outlook to a 4.9% decline as the first half of the year was below their prior forecast and the recovery in the second half is now expected to be slower. (1)
Gold (GLDM), a Precious Metals holding, continued its advances with a 1.5% gain last week; it is up 16.54% year to date. (2) It has been attracting investors who are fearful of the high level of volatility and those watching the US dollar fall relative to the developed markets currencies (DXY index) as a softer dollar makes assets priced in the dollar more attractive to overseas buyers. At $1,780.50 per ounce, this precious metal is also nearing its last peak reached eight years ago. (2)
Initial jobless weekly claims declined once again to 1.48 million but was higher than expectations of 1.25 million to 1.38 million. Additionally, the prior week was adjusted higher by 32,000. Total continuing claims are 19.5 million, lower than consensus estimates. (3)
Durable goods orders excluding volatile transports rose 4% in May, well ahead of the consensus expectation for 2.1% growth. (4)
Our economy declined 5% in the first quarter versus the prior quarter, unchanged from prior estimates. Inflation (excluding volatile food and energy) rose 1.7% from the prior quarter. (5)
Consumer sentiment slipped in the second half of June, although – at 78.1 – it still recorded another gain versus the April low. For those in the Northeast, the index rose by an all-time record of 19.1 points, as residents anticipate that their later and more gradual reopening post Covid-19 would produce at worst a very slight increase in infections. (6)
Proprietary portfolio happenings:
Major US banks— including G50 holdings JP Morgan (JPM), Citibank (C), US Bank (USB), and Bank of America (BAC)—dropped 5-8% last week on news that the Federal Reserve will prohibit stock buybacks in 2020 and capped dividends at the rate paid by each bank in the first quarter. The Fed’s analysis of banks under a major stress scenario found nearly all banks’ capital was adequate. (7)
AeroVironment Inc. (AVAV), a G33 holding, rose 14% after management achieved 17% growth for fiscal ‘20 on very strong unmanned aerial system sales to the US Department of Defense. Earnings were also ahead of expectations. The company also guided for very strong revenue growth of 10% for next year with backlog rising 27%. (8)
Johnson & Johnson (JNJ), a G50 holding, received an appeals court decision that reduced its damages by more than half the $4.69 billion the company had been ordered to pay in a baby powder safety case. (9)
Wyndham Destinations Inc. (WYND) a Core Select and Contrarian Choice holding, dropped 12% with the leisure group on fears of a wide scale increase in coronavirus.10
Did You Know? Around 15,000 fireworks displays occur for the Fourth of July holiday celebrations. Last year $375 million was spent on display fireworks weighing over 24 million pounds. Most small towns spend $8,000 -15,000, with larger cities going into the millions. The Boston Pops Fireworks Spectacular costs more than $2 million.
Sources: (1) JP Morgan Weekly Market Recap 6-29-20, (2) Apmex.com, (3) Department of Labor Unemployment Insurance Weekly Claims 6-25-20, (4) US Census Bureau 6-25-20, (5) Bureau of Economic Analysis 6-25-206 University of Michigan Survey of Consumer Sentiment 6-26-20, (7) Federal Reserve Stress Test Results 6-25-20, (8) AeroVironment Inc. press release 6-23-20, (9) US News & World Report “ Appeals Court Reduces J&J Talc Verdict” 6-23-20, (10) Yahoo Finance.com