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 August 21, 2020.
The S&P 500 and NASDAQ set record closing highs again, with gains of 0.77% and 2.69%, respectively, for the week. Overseas markets, however, declined with the international developed markets (MSCI EAFE) dropping 0.99% and the emerging markets (MSCI EM) off by 0.10%. In the U.S., technology and consumer discretionary were the strongest performing sectors (as they have been on a year-to-date basis) while energy and financials were the biggest laggards (as they have been on a year-to-date basis also). (1)
The Federal Reserve indicated they were lowering their economic growth estimate for the latter half of the year since their prior estimate assumed additional stimulus measures would be passed by Congress. (2) Because these have been delayed by politics ahead of the presidential elections, interest rates fell and bond values rose, with the benchmark 10-year U.S. treasury rate declining 7 basis points to 0.64%. (1)
Oil prices are rising today as a pair of tropical storms, expected to make landfall within days of each other, closed in on the Gulf of Mexico. This is forcing the shutdown of offshore rigs responsible for more than half of the region’s crude and natural-gas production or around 1 million barrels per day of oil. Further, refiners are vulnerable to flooding from the storms. (3)
Weekly new claims for U.S. unemployment benefits unexpectedly rose 135,000 (back above 1 million) last week vs. expectations for a week-over-week drop of 50,000. The increase reflected another wave of unemployment as the pandemic continues to affect businesses. (4)
Existing home sales for July rose nearly 25% from the prior month on top of a 21% rise in June as buyers tried to catch up after the COVID-19 shutdown and also take advantage of very low interest rates. On a year-over-year basis, sales rose 8.7%. The median home price was $304,000, up 8.5% year-over-year and passing the $300,000 mark for the first time. (5) July new home starts & permits were reported up 23% and 19%, respectively, year-over-year and significantly ahead of expectations as activity reopened. The number of permits is now back at pre-COVID levels. (6)
Proprietary portfolio happenings:
The Home Depot (HD), a Core Select and G50 holding, announced sales and earnings that exceeded expectations including U.S. same store sales growth of 25%. The home improvement market is taking share of the consumers’ wallet. (7) Shares rose 1.0% for the week and are up 30% year-to-date.
Lowe’s Companies, Inc., a Core Select holding, reported sales and profits that far exceeded expectations including U.S. same store sales growth of 35%. Dramatically improved technology and operations enabled the retailer to meet strong customer demand. Sales momentum continues into August. (8) Shares rose 4.8% for the week and are up 35% year-to-date.
Synopsys Inc. (SNPS), a Core Select holding, reported revenues and earnings that were ahead of expectations and guided the next quarter’s results higher. Additionally, investors viewed the notice of its new Chief Operating Officer as a positive for this software service company. (9) Shares rose 8.6% for the week and are up 53% year-to-date.
Target Corp. (TGT), a Core Select and G50 holding, reported a huge beat on sales and earnings – including U.S. same store sales growth of 24% – and management indicated that the strength is continuing in the current quarter. Online, delivery and order online/pick up in store sales were key drivers of growth. (10) Shares rose 12.5% for the week and are up 20% year-to-date.
WalMart (WMT), a Core Select and G50 holding, announced sales and profits that exceeded expectations including U.S. same store sales growth of 9%. The retailer continues to benefit from its omni-channel capabilities. (11) Shares eased off 1% for the week but are up 11% year-to-date.
Did You Know? Psychoacoustics is the alteration of sound to create some improvement in perception. A great example is the sound of a car door closing. Auto manufacturers found that they can manipulate the sound that doors generate while closing to the right low-frequency “thwump” sound to make buyers sense a car’s quality and craftsmanship in order to justify a premium price tag … even if the quality is not there.
Sources: (1) JP Morgan Weekly Market Recap 8-24-20, (2) Federal Open Market Committee Minutes release 8-19-20, (3) 3 Marketwatch.com “Oil Prices Rise as Twin Storms…” 8-24-20, (4) US Department of Labor press release 8-20-20, (5) National Association of Realtors press release 8-21-20, (6) US Census Bureau 8-18-20, (7) The Home Depot press release 8-18-20, (8) Lowe’s Companies Inc. press release 8-19-20, (9) Synopsys, Inc. press release 8-19-20, (10) Target Corp. press release 8-19-20, (11) Walmart Corp. press release 8-18-20