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 November 20, 2020.
The equity markets were mixed amid a resurging spread of COVID-19 here and abroad together with news of promising vaccines. Small and mid-cap stocks were in favor in the U.S., and overseas stocks were strong. The benchmark S&P 500 declined 0.73%, the Russell 2000 added 2.38% and the NASDAQ edged 0.25% higher. Overseas, the developed markets (MSCI EAFE) gained 1.88% while the emerging markets (MSCI EM) rose 1.77%. Energy and industrials were the best performing sectors in the U.S. while utilities and health care were the worst performers. (1)
Bond prices rose as interest rates declined, with the benchmark 10-year U.S. treasuries ending the week with a 0.83% yield, down 6 basis points. (1) Spreads have been narrowing since late March as investor are more comfortable with the outlook for higher risk securities. The value of corporate high yield bonds (ETF: JNK) have risen by 26.6% in that time as the risk difference between high yield and U.S. government bonds has contracted from 1088 basis points at the peak in March to 448 basis points last Friday. Investment grade bonds (ETF: LQD) during that time have gained 24.3% in value.
Oil prices rose 5.7% to $42.43 per barrel of West Texas crude. (3) That marks the highest price in nearly three months as positive news about vaccines for COVID-19 is driving higher forecasts for energy demand in the coming year.
The national unemployment rate declined by 1.0 percentage point over the month to 6.9%. Hawaii had the highest unemployment rate at 14.3% while Nebraska had the lowest at 3.0% (4)
Existing home sales rose 26.6% year-over-year. The average home price was $313,000, up 15.5% from a year ago as the inventory of homes available for sale was the lowest in recorded history. Sales of homes in the Midwest showed the greatest gains, rising 28.1% from a year ago .(5)
Proprietary portfolio happenings:
Louisiana Pacific (LPX), a Core Select and Contrarian Choice holding and a major supplier of lumber for new home construction, rose 9.02% after a report of record builders’ confidence, on top of the prior month’s record confidence. Low interest rates, improving employment and the vaccine news have all contributed to an improving outlook for new home construction. (7)
Target Corp. (TGT), a G50 and Core Select holding, reported store comparable sales increased 9.9% and digital comparable sales jumped 155% last quarter, each well ahead of consensus expectations. Earnings also beat expectations, rising 105% year-over-year. (8) Shares rose 5.8% for the week.
Did You Know? Benjamin Franklin wished the turkey was the national bird. In a letter to his daughter, Benjamin Franklin wrote, "For my own part I wish the Bald Eagle had not been chosen the Representative of our Country...For the Truth the Turkey is in Comparison a much more respectable Bird." And although Franklin didn’t have his wish granted, his letter inspired a song performed in 1776, the Tony-winning musical about the drafting of the Declaration of Independence.
Sources: (1) JP Morgan Weekly Market Recap 11-23-20, (2) Federal Reserve Bank of St. Louis, (3) Oilprice.com 4 US Department of Labor 11-20-20, (5) National Association of Realtors 11-19-20, (6) All Stock price changes: Yahoo Finance.com, (7) National Association of Home Builders 11-18-20, (8) Target Corp. press release 11-18-20