The economic trends remained in place as 2019 wrapped up as the number of Americans who applied for unemployment benefits at the end of 2019 fell slightly, showing the pace of layoffs in the U.S. remains near a half-century low. Initial jobless claims slipped by 2,000 to 222,000 in the seven days ended Dec. 28. Meanwhile a slump of American manufacturers deepened in December as a survey of senior executives showed the weakest performance in more than 10 years. The Institute for Supply Management said its manufacturing index slid to 47.2% last month from 48.1% in November, marking the fifth straight contraction. One would think that in 2020 either the manufacturing sector will need to rebound or jobless claims will start to rise. The record level of the market suggests that investors expect the former, as the estimated earnings growth rate for 2020 is 9.6% with the Industrial and Materials sectors forecasted to report 14.8% and 13.4% earnings growth respectively. Much of that optimism is based on the hope of tariff relief and a resolution of Boeing’s 737 Max issues.
The most significant development was that Qassem Soleimani, the head of Iran’s elite Quds military force and one of the most powerful figures in the Islamic Republic, was killed early Friday in an U.S. airstrike in Baghdad. The market reaction was surprisingly muted, although the sell-off in equities did erase earlier gains and left the S&P 500 with a 0.16% decline for the week. Oil prices and Gold jumped over 2% on the news, and the yield on the Ten-Tear Treasury dropped 8 basis points to 1.79%. The Dollar remained steady, which we believe is a sign that the rest of the world has not begun disinvesting in the United States in response to our various actions. We continue to monitor the Dollar as any material weakness could be a warning sign.
All eyes will be on the Middle East as investors (and people in general) nervously await the response from Iran to the death of Soleimani. On the economic front, Friday’s jobs report will be in focus, with a consensus estimate of 157,000 gain and for unemployment to remain steady at 3.5%.
Professional football, basketball, and hockey remain relevant in cities other than Chicago.
Biggest Percentage Weekly Movers:
For the first time that I can remember none of the companies in our portfolios moved more than 10% during the week. There was no news on our biggest gainer, U.S. Auto Parts Network, Inc. (PRTS), which was up 9%, a 0.97% holding in the North Star Micro Cap Fund. Or our biggest loser, Oil Dri Corp of America (ODC), which was down 5.7%, a 0.77% holding in the North Star Dividend Fund.
The information provided in this commentary is not an offer to sell or the solicitation of an offer to purchase any security, product, or brokerage service. The information is not intended to be used as the basis for investment decisions, nor should the information be construed as advice designed to meet the particular needs of any investor. This commentary is presented to illustrate examples of the securities that North Star Investment Management Corporation and/or its affiliates (“North Star”) may have bought for client accounts and the diversity of markets in which North Star Investments may invest, and may not be representative of current or future investments. You should not assume that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary will be profitable or will be equal to any corresponding performance levels that might be indicated. Past performance is no guarantee of future results. Investments in securities involve risks including the possible loss of the principal invested. North Star and others associated with it, including employees, may have positions in and effect transactions in securities of companies mentioned or indirectly referenced in this commentary. North Star may buy, sell or hold these securities in proprietary or client accounts. North Star will not be providing regular updates or advising you of any changes in the views expressed herein. Investors should consider their investment objectives, risk tolerance, and financial situation and needs before investing in any security. Tax considerations, commissions, fees and other costs should be carefully evaluated with one’s investment and/or tax advisors. Information provided is obtained from sources deemed to be reliable, but North Star cannot guarantee the accuracy or completeness of the information. This material may not be reproduced, distributed or transmitted to any other person in whole or in part without the prior written consent of North Star. A copy of North Star Investment Management Corporation’s Form ADV Brochure, Privacy Notice and Business Continuity Plan summary can be obtained by calling 312-580-0900.