Weekly Economic Update

Economic Update 12-29-2020

  • On the shortened holiday week, economic data included a decline in personal income and spending, mixed results in housing, and weaker consumer confidence.
  • Global equity markets were down on net last week, as agreement on Congressional stimulus remained in limbo and Covid case counts remain high, along with a newly identified strain in the U.K. Bonds fared positively in the U.S. with lower interest rates, but hampered elsewhere due to a stronger dollar. Commodity prices generally fell last week.

U.S. stocks started the week down early, with the positivity surrounding the Congressional relief package, which was tempered later in the week with additional demands from the President for larger direct payments. Additionally, reports in the U.K. of a ‘mutant’ Covid strain, which appears to be more transmissible than the original, caused a bit of trepidation. This resulted in several nations restricting travelers from the U.K., adding to other lockdowns already in place. (Later claims that the current vaccines would be effective against these one-off strains appeared to alleviate some of the concern.)

By sector, conditions were mixed with financials and technology earning returns of just under a percent for the week. On the other hand, communications, consumer stocks, and utilities all declined nearly a percent. Real estate ticked higher, on the heels of lower interest rates. Small cap stocks continued to rally, as stimulus in the works is expected to positively affect that more economically-sensitive group.

Foreign stocks performed similarly to U.S. equities, with most regions lower, and not helped due to the impact of a stronger U.S. dollar. Other than Covid case counts and expected U.S. stimulus (assumed to have global impact through the broader supply chain), the reaching of a Brexit deal between the U.K. and Europe was a positive input, although offset by the U.K. ‘mutant’ Covid issue. More negatively, at least for emerging market equities, was the continued change in tone by the Chinese government toward Jack Ma and Alibaba, which began an anti-monopoly investigation into the firm. The timing appears to have coincided with his criticism of the Chinese communist government.

U.S. bonds were helped by a small decline in interest rates across the yield curve, with treasuries and investment-grade corporates earning positive returns. Bank loans and high yield ended flattish on the week, while foreign debt was held back by a stronger dollar, pushing returns into negative territory.

Commodities declined as the dollar ticker higher last week, with a gain in agricultural prices offset weaker returns from energy and metals. The price of crude oil fell by -2% on net to just over $48/barrel, while natural gas fell -6%.

Have a good week and Happy New Year. We’ve appreciated the chance to work with you in 2020, and look forward to a better (and hopefully more normal) 2021.

Period ending 12/25/20201 Week (%)YTD (%)
DJIA0.078.27
S&P 500-0.1516.71
NASDAQ0.3943.97
Russell 20001.7421.68
MSCI-EAFE-0.606.33
MSCI-EM-1.0412.61
BBgBarc U.S. Aggregate0.147.27
U.S. Treasury Yields3 Mo.2 Yr.5 Yr.10 Yr.30 Yr.
12/31/20191.551.581.691.922.39
12/18/20200.080.130.390.951.70
12/25/20200.090.130.370.941.66

Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product. 

FOR ADVISOR USE ONLY – NOT FOR DISTRIBUTION TO THE PUBLIC WITHOUT PRIOR APPROVAL FROM YOUR RESPECTIVE FIRM’S COMPLIANCE DEPARTMENT

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