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 July 24, 2020.
U.S. stocks declined last week across the major indices, with the S&P 500 down 0.27%, the Russell declining 0.38% and the NASDAQ dropping 1.33%. With COVID-19 cases continuing to grow and joblessness still very high, there is heavy pressure on the government to extend benefits while leaving an incentive to return to work. International developed markets (primarily European) measured by the MSCI EAFE rose 0.42% while the emerging markets (MSCO EM) added 0.57% as COVID-19 is having a lesser impact on their economies. (1)
Bond prices rose as interest rates fell last week, with the benchmark 10-year U.S. treasury yield down 5 basis points to 0.59%, the lowest since April 30, as investors await the next government stimulus package while the Federal Reserve continues its mandate “to do whatever they can for as long as they can”.1
Gold (ETF: GLDM), an ETF Endowment Series and Precious Metals holding, rose 5% last week to a nine-year high and silver rallied to prices not seen since 2014. Precious metals prices were lifted by the European Union’s agreement to an economic recovery package combined with the beginning of negotiations on another major U.S. stimulus package. These factors caused the U.S. dollar to break down to the lowest level since early March, which helps drive the prices of precious metals higher. (2)
The European Union’s 27 countries agreed to a $2 trillion spending package to contain the economic recession caused by COVID-19. The deal includes massive borrowing followed by grants, rather than loans, to countries which are the most affected by the economic downturn. (3)
leading indicator of construction – the index of demand for design services from architecture firms – began to stabilize in June after a sharp decline in April. Index scores for new project inquiries and new design contracts also showed signs of stabilizing. Apartments and condos saw the most positive signs while hotels, office and retail continue to suffer. (4)
On top of the NY economic expansion reported last week, the Chicago Federal Reserve’s national activity index improved sharply in June over May. The index rose to a record high of 4.11 from 3.50 and well ahead of the -18.09 trough in April. A zero value for the index indicates the national economy is expanding at its historic trend rate of growth. (5)
Proprietary portfolio happenings:
eHealth Inc. (EHTH), a G33 holding, reported strong revenues and earnings but management expects growth to slow with higher costs to acquire new customers. Shares dropped 26% for the week.6
Lockheed Martin Corp. (LMT), a G50 and Core Select holding, reported revenues and earnings that beat expectations and raised their 2020 guidance slightly. Shares rose nearly 5% for the week on the news. (7)
Snap Inc. (SNAP), a G33 and Contrarian Choice holding, shares dropped nearly 10% for the week after reporting results that were below consensus expectations. The price of its shares had been very strong going into the report. (8)
Taiwan Semiconductor Manufacturing (TSM), a G40-I holding, shares rose 11% following a stronger than expected revenue and earnings report and a positive outlook from the manufacturer of semiconductor equipment.9
Unilever (UL), a G40-I holding, rose 8% following a report that revenues and earnings were ahead of expectations for this global manufacturer of food and household products. Management noted that as consumer habits and the status of lock-downs have been changing during this period, they have been quick to adapt and reallocate their resources. (10)
Did You Know? With the re-opening of major league baseball – without fans in the stadium – the league launched a feature to make the games feel more normal for the players. It takes the fans’ reactions to their team's games on its website, Gameday app and through social media links and allows scoreboard operators at ballparks to adjust the type of artificial fan noise they pump to empty stadiums.
Sources: (1) JP Morgan Weekly Market Recap 7-27-20, (2) US Department of the Treasury, (3) Reuters, “What EU leaders agreed on the post-COVID recovery package” 7-21-20, (4) American Institute of Architecture Billings Index 7-22-20, (5) Federal Reserve Bank of Chicago 7-21-20, (6) eHealth press release 7-23-20, (7) Lockheed Martin press release 7-21-20, (8) Snap Inc. press release 7-21-20, (9) TSMC press release 7-16-20, (10) Unilever press release 7-23-20