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 January 8, 2021. Economic/Market happenings:
Stocks moved higher last week as both houses of Congress, along with the White House, will be in the control of the Democrats following Tuesday’s Senate runoff elections in Georgia. This unexpected “blue wave” raises the likelihood of additional COVID-19 relief spending in the coming weeks and offset the terrible scene at the U.S. Capital the following day. The week ended with the S&P 500 and the Nasdaq Composite setting records, rising 1.88% and 2.45%, respectively. International developed markets (MSCI EAFE) rose 3.16% and emerging markets (MSCI EM) gained 4.79%. In the U.S., energy and materials were the best performing sectors while real estate and consumer staples were the laggards. (1)
The rising prospects for increased U.S. government borrowing to fund further economic stimulus caused interest rates to rise and bond values to fall across all maturities last week, with the benchmark 10-year treasury yield rising to 1.13% for a 20 basis point gain. (2)
The price of West Texas crude oil crossed the $50 mark for the first time in nearly a year. On Tuesday the OPEC+ group announced its decision to keep production levels steady in February, although Saudi Arabia later unexpectedly said it will cut an additional 1 million barrels per day in February and March. West Texas crude closed the week up 7.7% at $52.24 per barrel. (3)
The U.S. manufacturing index rose to 60.7 in December, a month-over-month gain of 3.2 points and 4.3 points ahead of consensus estimates. This was the index’s seventh straight reading of 50.0 or greater which indicates expansion. The sub-segment showing the greatest increase was priced with a gain of 12.2% over the prior month while inventories showed the smallest gain at 0.4% which is positive for future production. (4)
Total non-farm payroll employment declined by 140,000 in December, the first decline in eight months, as cases of coronavirus accelerated and people adjusted to contain the pandemic. Employment at bars and restaurants dropped by 372,000 as customers shied away and many states re-imposed business restrictions and recreation (theme parks, casinos, etc.) also declined by 92,000. The unemployment rate was unchanged at 6.7%. (5)
Proprietary portfolio happenings:
Company News (6)
Energy stock holdings were strong again last week on rising prices of crude oil (see Commodities above). Notable gains were in BP plc (BP) in the G40i strategy which rose 18.9%, and Parsley Energy Inc. (PE) in the G33, Core Select, Contrarian Choice strategies which gained 15.6%.
Teledoc Health Inc. (TDOC), a G33 holding, rose 13.9% on expectations of larger contribution to earnings from its recent acquisition of Livongo that management had forecast. Management will be speaking at a major conference this week.7,8
Did You Know? Flamin’ Hot Cheetos were developed by a janitor at Frito-Lay! Richard Montanez, who got the idea after putting chili powder on some reject Cheetos and then pitched it to the CEO. He’s now a successful executive and motivational speaker, and a movie is in the works about his life.
Sources: (1) Franklin Templeton What Happened Last Week 1-11-20, (2) US Treasury, (3) Oilprice.com (4) Institute for Supply Management press release 1-5-21, (5) Bureau of Labor Statistics 1-8-21, (6) Yahoo.com (7) Motley Fool 1-5-21, (8) Teledoc Investor Relations press release 1-5-20