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 22, 2021. Economic/Market happenings:
Markets were higher last week with a definite emphasis on growth stocks. The S&P 500 rose 1.96%, the Russell 2000 added 2.15% and the NASDAQ advanced 4.19%. Overseas, the emerging markets (MSCI EM) rose 2.57% while international developed markets (MSCI EAFE) edged up 0.70%. Communications services and technology were the best performing sectors while financials and energy were the laggards. (1)
Interest rates and bond values were virtually flat for the week with the benchmark 10-year treasuries ending with a 1.10% yield.
Lumber prices are down 20% year-to-date after climbing 115% last year. Once COVID-19 became widespread, lumber production declined last year. This occurred at the same time that demand from both new housing starts and the repair and remodel sector rose significantly, pressuring lumber pressure prices higher in 2020. With supplies now more in balance with demand and an outlook for further supply increases, lumber prices are falling. (3)
Weekly initial jobless claims were higher than expected at 900,000 and the prior week’s report was revised upward. Initial claims remain significantly above average and help validate calls for further jobless assistance from the government. (4)
Low mortgage interest rates drove housing starts to 1.67 million in December, well ahead of the 1.56 consensus expectations. Likewise building permits were well ahead of expectations at 1.71 million. The key takeaway from the report is that the growth was driven entirely by single-unit dwellings. (5)
Proprietary portfolio happenings:
Company News (6)
AeroVironment (AVAV), a G33 holding, increased 14.2% last week following the announcement of an acquisition of a drone manufacturer for the defense industry, adding key services to AVAV’s current offerings. The deal is expected to propel AVAV’s total growth rate higher. (7)
eHealth (EHTH), a G33 and Contrarian Choice holding, rose 12.2% last week on expectations that it would benefit from a larger role for its Medicare Advantage business under the new Biden administration. (8)
Netflix (NFLX), a G33 and Core Select holding, reported revenues, operating margins and earnings that were ahead of expectations and its robust subscription growth of 22% helped drive the stock price 13.5% higher last week. (9) Did You Know? The idea that compasses point towards a magnetic mountain at the north pole dates to the Romans. Gerardus Mercator’s map, published in 1595, shows a mountainous island of magnetic black rock at the pole that was 33 miles wide, encircled by a sea pouring into the Earth. These details came from a summary of a missing book, Inventio Fortunata, an Oxford friar’s account of a journey undertaken in 1360 around the north Atlantic. No copies of this travelogue survive, but it seems to have been an extraordinary work of the imagination.
Sources: (1) JP Morgan Weekly Market Recap 1-25-21, (2) US Treasury, (3) Barron’s “A Strong Housing Market Boosted Lumber Prices” 1-23-21, (4) Department of Labor press release 1-21-21, (5) US Census Bureau 1-21-21 (6) All weekly changes in company stock prices: Yahoo Finance, (7) AeroVironment press release 1-13-21, (8) JDSUPRA blog 1-12-2021, (9) Netflix press release 1-19-21