Archive for ND&S Updates

August 31, 2020 

Markets continued grinding to new heights last week on strong corporate earnings announcements, emergency FDA approval of a 15 minute rapid Covid-19 test, and a dovish policy shift from the Federal Reserve. For the week, the DJIA increased 2.64%, the S&P 500 rose 3.29%, and the tech-heavy NASDAQ climbed 3.4%. International stocks were also positive on the week with developed country stocks (MSCI EAFE) and emerging markets stocks (MSCI EM) adding 1.69% and 2.76%, respectively.

Federal Reserve Chairman, Jerome Powell, announced last week slight changes on how the Fed views inflation. From their release, “our new statement indicates that we will seek to achieve inflation that averages 2 percent over time. Therefore, following periods when inflation has been running below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.” The takeaway from his remarks was the Fed will likely let the economy run hot before raising rates. The immediate result was the yield curve steepened with intermediate and longer term yields moving higher while short-term rates stayed the same or moved slightly lower. The 10yr U.S. Treasury closed at a yield of 0.74%, which is up from 0.64% the week prior.

Economic news was mostly positive last week. New home sales in July, increased 13.9% month over month which greatly exceeded expectations. Manufactured durable goods orders increased 11.2% (230.7 billion) in July, which beat expectations. Lastly, US 2nd Quarter GDP was adjusted higher to -31.7% from last month’s advance estimate of -32.9%. Looking ahead, August’s non-farm payrolls will be released on Friday.

Apple’s 4 for 1 stock split will go into effect on Monday, August 31st which has prompted as change to the price-weighted Dow Jones Industrial Average (DJIA). The diversified industrial, Honeywell (HON), will replace Raytheon Technologies (RTX); biotech, Amgen (AMGN), will replace the pharmaceutical company, Pfizer (PFE). An excellent representation for the last five years and maybe even the past decade, Salesforce (CRM), will replace the oil giant, Exxon Mobil (XOM), which has been a DJIA component since 1928.

Let’s make it a good week!

“Attitude is a little thing that makes a big difference.” – Winston Churchill

ND&S Weekly Commentary 8.24.20 – Markets Mostly Higher, again

August 24, 2020 

Markets were mixed last week with most U.S. indices moving higher while international indices gave back a bit of ground. Technology led the way, once again, last week as investors questioned the value/cyclical trade given a lack of progress on fiscal stimulus (it must be an election year …) and disappointing jobless claims. The Fed added a dose of realism as they released minutes from their July meeting – the minutes highlighted the Fed’s concerns for the lack of strength in the broader economy.

For the week, the DJIA eked out a 0.09% gain while the S&P 500 advanced 0.77%. Noteworthy is the fact that the S&P 500 climbed to a record high thanks to its top-heavy weighting in technology stocks. The Nasdaq jumped 2.69%. Developed international markets lost a bit of ground. For the week, the MSCI EAFE index lost 0.99% while emerging market equities (MSCI EM) were lower by 0.10%. Small company stocks, represented by the Russell 2000, finished in the red by 1.59% for the week. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week higher by 0.27%. As a result, the 10 YR US Treasury closed at a yield of 0.64% (down ~7 bps from the previous week’s closing yield of ~0.71%). Gold prices closed at $1,934.60/oz – down 0.12% on the week. Oil prices were relatively flat last week as oil closed at $42.34.

Economic news released last week was mixed. On Tuesday, the U.S. Census Bureau reported that housing starts jumped 22.6% month-over-month to a seasonally adjusted annual rate of 1.496 million, exceeding expectations for a rate of 1.25 million. Housing continues to be a bright spot for the U.S. economy. On Thursday, the Department of Labor reported that initial jobless claims for the week ending August 15th were 1,106,000, missing expectations for 923,000 claims. On Friday, the HIS Markit Group reported that the Composite PMI Output Index for August hit an 18-month high at 54.7, up from 50.3 in July. Also on Friday, the National Association of Realtors reported that existing homes sales rose 24.7% in July, exceeding expectations.

The markets seem to be at a crossroad … with some markets hitting an all-time high, investors are rightly concerned about extended valuations and the upcoming election. Of course, any encouraging news on the vaccine front will likely push markets higher. We urge investors not to overthink the current wall of worry and to stick close to long-term target asset allocations.

Enjoy the last week of August!

“Success is how high you bounce when you hit bottom.” – George S. Patton


NDS Weekly Commentary (8.17.20) – Market Advance Broadens

August 17, 2020 

Equity markets continued their advance last week. In the U.S., the DJIA and S&P 500 were up 1.9% and 0.7%, respectively. The NASDAQ was basically flat as technology stocks, which have been leading the markets, took the week off. So far in August, economically sensitive sectors like financials, industrials and energy have been bouncing back on signs the economy is starting to recover. Industrials and energy were the best performing sectors last week, while utilities and real estate were the worst. A broadening in the stock market is a good sign. International equity markets also advanced last week with the MSCI EAFE up 2.5% and emerging markets up 0.4%.

Economic news was mostly positive as initial jobless claims fell below 1million for the first time since March and retail sales were up 1.2%, a third consecutive monthly gain. Most economists are expecting the 3rd quarter GDP to rebound at an 18.3% annual rate. Consumers are still cautious, however, as there are still regional spikes in the Coronavirus and uncertainty over the return to schools. Data shows that credit card spending slowed in late July and early August compared to a year ago. Core CPI rose 0.6% in July, tripling expectations for a 0.2% monthly gain. Fixed income markets reflected the stronger economic numbers with the 10 year U.S. Treasury yield increasing from 0.57% to 0.71%.

We still expect markets to be volatile and dominated by Coronavirus news and election headlines. A diversified portfolio should continue to serve you well.

“Well done is better than well said.” – Benjamin Franklin

ND&S Weekly Commentary 8.10.20 – Second Round of Stimulus Hopes Lifts Stocks

August 10, 2020 

US stocks recorded solid gains last week on hopes that another round of stimulus would be announced and as employment data showed that the economy added more jobs than expected last month. Washington continues to haggle over the amount of stimulus and its beneficiaries. Without question, fiscal and monetary stimulus have been the drivers of our economic progress and the stock market’s amazing rebound since the pandemic began. More relief is needed for businesses and consumers until Covid-19 is better under control.

The economy added 1.8 million jobs in July and unemployment fell to 10.2% from 11.1% in June, much better than expected. Despite the improved jobs report, unemployment is near its peak of 10.6% reached during the recession of 2008. With Washington unable to agree on a stimulus package, President Trump, on Saturday, preemptively used executive powers to extend unemployment benefits, provide a payroll tax holiday and other relief measures. Democrats claim foul and question the legalities of the executive orders, while Republicans declare that the Democrats are holding back the desperately needed financial relief for political gain.

The US leads the world in COVID-19 infections and deaths. Over 5 million people have been infected and the virus continues to spread. The development of vaccines and better treatments and care, offer hope that we can manage through this crisis. However, with schools and businesses reopening the fear of a second wave is a major concern.

For the week, the Dow Jones Industrial Average rose 3.8%, the S&P 500 gained 2.5% and the tech-heavy Nasdaq was up 2.5%.The Nasdaq topped the 11,000 level for the first time on Thursday. The big winner was small US companies as the Russell 2000 surged 6%. Foreign markets have been benefiting from a weakening US dollar. Developed market stocks, as measured by EAFE, increased 2% while emerging markets rose 1%. The 10 year US Treasury ended the week at a historic low yield of .57%.

There are also renewed concerns over trade with China. On Thursday, President Trump signed executive orders which in effect impose a deadline for a US company, possibly Microsoft, to purchase TikToK’s U.S. operations. China is opposed to US companies taking advantage of the situation. Our economic concerns, political instability and tensions around the globe are reflected in the market for safe-haven investments like gold. The price of gold continues to rise at $2,031/oz., the ninth consecutive week of gains.

We are surprised by the resiliency of the financial markets and are cautious about the near term. Nevertheless, a globally diversified portfolio with a bias towards dividend income, and keeping a close eye on risks, will pave the way to reasonable investment returns.

The week ahead inflation numbers will be reported on Tuesday and Wednesday, weekly unemployment claims on Thursday and retail sales, business inventories and consumer sentiment on Friday.

“The leader is one who, out of clutter, brings simplicity….and out of discord, harmony…., and out of difficulty opportunity.” —Albert Einstein

Big Tech Survives the Week Pushing Major Indexes Higher

August 3, 2020 

Major indices pushed higher last week on the back of positive earnings from tech titans – Amazon, Apple and Facebook. Despite contentious anti-trust hearings Wednesday on Capitol Hill, the mega-tech companies came through earnings relatively unscathed even with high expectations coming in.

On the week, the S&P 500 increased 1.75% while the DJIA slipped 0.15%. Small companies represented by the Russell 2000 increased 0.89%. International markets were volatile with developed markets giving back 2.12% and emerging markets increasing 1.77%. The yield on the on the 10yr US Treasury declined to 0.55%. Gold prices continued to advance closing at $1965/oz. marking a 3.3% advance on the week. Oil (WTI) pulled back to $40.25 per barrel.

U.S. economic data varied last week. Manufactured durable goods orders increased 7.3% in June, beating expectations. The Bureau of Economic Analysis reported that the economy contracted a “post-depression” record 32.9% in the 2nd quarter which was actually better-than-feared. Analyst expectations were for a 34.5% contraction. The economy likely bottomed out at the end of April/beginning of May so expectations are for a record advance in GDP in the 3rd quarter. Consumer spending increased 5.6% in June, outpacing expectations for a 5.2% increase. On the negative side, jobless claims increased for the second week in a row while personal income declined 1.1% in June. There will be reports released this week on manufacturing and services PMIs and July U.S. employment.

Earnings continue to come in well ahead of expectations. 83.9% of companies have reported a positive EPS surprise. Earnings growth is down roughly 33.4% year over year vs expectations of an overall decline of 37.7%. Revenues have declined 9% year over year versus expectations of a 10.5% decline. Earnings season will continue this week with CVS and Disney among those scheduled to report.

We anticipate markets taking a breather here. With earnings season more than half way over, investor attention will begin turning to COVID-19 response and the upcoming election. We are sticking close to our investment policy targets and selectively adding to dividend growth opportunities where prudent.

“If all economists were laid end to end, they’d never reach a conclusion.” – George Bernard Shaw