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 October 2, 2020.
Stocks rose early in the week after House Speaker Pelosi said a bipartisan deal for another COVID-19 relief package was possible before the week’s end. On Friday - although there was no deal and the President was hospitalized with COVID-19 - stocks continued to move upward. For the full week, the S&P 500 rose 1.54%, the Russell 2000 added 4.42% and the NASDAQ was up 1.50%. Overseas, the developed markets (MSCI EAFE) rose 1.57% while emerging markets (MSCI EM) added 2.22%. Within the U.S., real estate and financials were the top performing sectors while energy and technology were the laggards. Value stocks outperformed growth stocks, and small stocks were the best performing by market cap size. (1)
Interest rates rose and bond values fell, with the benchmark 10-year U.S. treasuries adding 4 basis points to 0.70%. The yield curve rose as the short end (2 year treasuries) rose 1 basis point and the long end (30 year treasuries) rose 8 basis points. (1) The risk premium between investment grade bonds and government bonds shrunk slightly. (2)
Oil prices dropped 10.3% to $37.05 per barrel (3) after negative comments surrounding oil demand, particularly for jet fuel, at an investment commodities conference. One commentator stated that a Biden win could add more downward pressure to prices as output from Venezuela and Iran could return.4
The index of consumer confidence jumped to 80.4 in August from 74.1 according to the University of Michigan. This was its best level since March as the decline in COVID cases and the creation of more jobs lifted consumers’ optimism last month. (5)
Manufacturing surged in September, with the Chicago purchasing manufacturers index at 62.4 versus 51.2 in August and well ahead of expectations. New orders, in particular, jumped to 64.9 from 53.5 and the highest since Feb 2019. Also noteworthy was the price index which rose 9.7 points. (6)
The growth in home prices on a national basis accelerated in July to 4.8% on a year-over-year basis, up from 4.3% in the prior month. Phoenix once again led all other markets with a 9.2% gain. The increase is driven by a need for indoor and outdoor space together with record low mortgage rates while fewer homes are available for sale. (7)
Proprietary portfolio happenings:
AstraZeneca (AZN), a G40i holding, together with the University of Oxford received notice that the European Medicines Agency and the Canadian health ministry have agreed to a rolling review of the marketing application for their COVID-19 vaccine, entering their final stage of development. (8)
Johnson & Johnson (JNJ), a G50 and Core Select holding, successfully completed its acquisition of Momenta Pharmaceuticals (MNTA) – a biotechnology firm focused on rare, immune-compromised diseases – in an all cash transaction for $6.5 billion. (9)
Starbucks (SBUX), a G50 holding, declared a 10% increase to their quarterly dividend citing, “confidence in the strength of our recovery and the robustness of our long-term growth model”. Yield on the new dividend is 2.08%. (10)
Did You Know? Have it your way! Starbucks offers 87,000 different drink combinations.
Sources: (1) JP Morgan Weekly Market Recap 10-5-20, (2) Federal Reserve Bank of St. Louis 10-5-20 (3) Oilprice.com, (4) Reuters, “Oil Traders Doubt OPEC Will Boost Output as Planned in 2021” 9-29-20 (5) The Conference Board Consumer Confidence Index 9-29-20, (6) ISM Chicago Purchasing Managers Index 9-30-20 (7) S&P CoreLogic Case-Shiller Index 9-29-20, (8) Reuters, “Canada Joins Countries in Real-Time AstraZeneca COVID Vaccine Review” 10-2-20, (9) Johnson & Johnson press release 10-1-20, (10) Starbucks Corp. press release 9-30-20