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 December 4, 2020. Economic/Market happenings:
A bipartisan U.S. fiscal relief proposal unveiled on Tuesday, in the $900 billion area, is a step in the right direction, but both sides of Congress continue to signal competing priorities. In general, investors are looking beyond the current economic data and considering the prospects for a “normal” economy post-vaccines. The S&P 500 added 1.72% as the Russell gained 2.04% and the NASDAQ rose 2.14%. Overseas, the developed markets index (MSCI EAFE) increased 1.03% as the emerging markets index (MSCI EM) added 1.66%. Within the U.S., energy and health care were the outperforming sectors while utilities and consumer discretionary sectors underperformed. (1)
Interest rates rose and bond values fell as the yield on 10-year U.S. treasuries rose 13 basis points to 0.97%. (1) Yield spreads also narrowed as investors favored higher risk securities; the differential between high yield bonds and government bonds has shrunk to the 410 basis point area from a peak of 1087 basis points in mid-March. (2)
Oil prices rose as the OPEC+ alliance agreed to a cautious increase in supply, one-quarter of their previous plan. (3) Additionally, U.S. government data revealed that oil demand had been ahead of expectations for the second consecutive week.4 The price of West Texas crude rose 1.6% to finish the week at $45.26 per barrel. (5)
The growth in jobs during November of 245,000 was far below expectations of 432,000 as government jobs dropped by 100,000. Meanwhile, the unemployment rate fell for the 7th consecutive month, to 6.7% as people left the workforce. Average weekly earnings were up 0.6% and are now just 0.7% away from being where they were last year at this time – a very solid improvement over recent months. (6)
Exports from the U.S. rose 2.2% to $182.0 billion in October from the previous month, while imports rose 2.1% to $245.1 billion as the trade deficit widened to $63.1 billion. Exports to China rose more than $3 billion to a record $14.7 billion in October, exceeding the previous high set in December 2017. Meanwhile, imports from China rose to $44.8 billion, reaching the highest level since the end of 2018. (7)
Proprietary portfolio happenings:
Banco Santander, SA (SAN), a G40i holding, gained 16.8% last week after a European regulator stated that European banks may be allowed to resume dividend payments in 2021 if they can prove their balance sheets are strong enough to withstand the economic and financial effects of the COVID-19 pandemic. (9)
DocuSign, Inc. (DOCU), a G33 holding, reported quarterly revenues and earnings that were well ahead of expectations, benefitting from the digital transformation of business agreements. Earnings per share were double those expected and management raised revenue guidance for the coming quarter. (10) Shares rose 7.2% for the week.
Merck & Co. Inc. (MRK), a G50 holding, announced the sale of its preferred stock holdings in COVID-19 vaccine producer Moderna (MRNA) based on substantial appreciation in the price of MRNA since their purchase in 2018. Merck and Moderna continue to collaborate on the development of specialized cancer vaccines. (11)
Did You Know? Last year the Transportation Security Administration collected nearly $1 million in coins and cash left behind by travelers at security checkpoints. That included about $19,000 in foreign currency. The unclaimed money goes into a special federal aviation security fund, mostly used for training and promoting TSA PreCheck.
Sources: (1) JP Morgan Weekly Market Recap 12-7-20, (2) Federal Reserve Bank of St. Louis 12-7-20, (3) Marketwatch.com 12-2-20, (4) US Energy Information Administration 12-2-20, (5) Oilprice.com, (6) US Bureau of Labor Statistics 12-4-20, (7) US Census Bureau 12-4-20, (8) All weekly changes in company stock prices: Yahoo Finance, (9) Barron’s: “European Banks Can Restart Dividend Payments” 11-25-20, (10) DocuSign press release 12-3-20, (11) Merck press release 12-2-20