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 28, 2020.
After dropping 34% from peak to trough earlier this year, the S&P has recovered and hit an all-time high, adding 3.29% in the last week. Smaller companies as indicated by the Russell 2000 have made a similar move off the bottom and rose 1.69% last week. The technology-heavy NASDAQ has recovered the strongest of the three indices and added 3.40% last week. Overseas, the international developed markets (MSCI EAFE) rose 1.69% last week while the emerging markets (MSCI EM) added 2.76%. In the U.S., the best performing sectors last week were communication services and technology while utilities and energy lagged. (1)
The Federal Reserve chair declared that higher employment is unlikely to spur inflation given the productivity trends of the last several years. It also confirmed investors’ expectations that the Fed will keep official interest rates low for the foreseeable future. (2) Interest rates rose and values fell across the yield curve as it steepened, with the benchmark 10-year U.S. treasuries rate rising 10 basis points to 0.74% and the 30-year rate rising 17 basis points to 1.52%.1 The differential (or “spread”) between government bond and high yield bonds narrowed by 25 basis points to 5.00%. This compares to 10.87% at the March peak, for a drop of 587 basis points since that time. (3)
Oil prices edged up following landfall of Hurricane Laura which avoided the vast majority of the Gulf Coast’s energy infrastructure. Inventories of U.S. crude declined for the fifth straight week while demand was largely unaffected by the storm. For the week the price of West Texas crude oil rose 1.49% to $42.97 per barrel. (4)
New orders for durable goods— which include household appliances, cars and aircraft – jumped 11.2% against the prior month for the third consecutive month and to the highest total since February. This beat the consensus forecast for a 4.3% gain and was driven by a 36% hike in orders for transportation equipment particularly autos and trucks. (5)
Germany extended a COVID-19 relief package including aid for small and medium size businesses until the end of 2020 and unemployment aid until the end of 2021 in an effort to stimulate their economy. (6)
Proprietary portfolio happenings:
Abbott Labs (ABT), a Core Select holding, rose 8.7% following their announcement of a 15-minute, non-invasive COVID-19 test for $5 each which has been approved by the FDA for those who have some symptoms. The government has already committed $750 million in purchases of the test.7 This notice led to gains for travel and leisure related stocks including Contrarian Choice and Core Select holding Wyndham Destinations (WYND), up 10.2%; G50 holding Starbucks (SBUX), up 8.2%; and G33 holding Planet Fitness (PLNT), up 8.1%.
Did You Know? M&M stands for Mars and Murrie. Forrest Mars (son of the Mars Company founder) first spotted the British confection Smarties during the Spanish Civil War and noticed the candy shell prevented the chocolate from melting. He teamed up with Bruce Murrie (son of Hershey Chocolate's president) and the company later trademarked the "Melts in Your Mouth, Not in Your Hand" slogan.
Sources: (1) JP Morgan Weekly Market Recap 8-31-20, (2) Barron’s: “Fed Shifts View on Employment…” 8-27-20, (3) Federal Reserve Bank of St. Louis 8-31-20, (4) Oilprice.com, (5) US Census Bureau 8-26-20, (6) Marketwatch.com: “European Stocks Close Higher…” 8-26-20, (7) Abbott Labs press release 8-26-20 and Business Insider “White House Signs $750 million Deal…” 8-27-20, (8) Yahoo Finance