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2020 Financial Markets Update

Week in Review: January 15, 2021

January 18, 2021

Recap & Commentary

US equity markets had a volatile week as investors digested headlines of continued tensions in Washington, President-elect Biden’s $1.9T stimulus plan, and the start of earnings season. The S&P 500 flirted with new highs during the week before ending lower. Oil fell from its ten-month high and treasury yields retreated as investors rotated into the asset class, seeking refuge from potential equity market volatility heading into Inauguration week. On Wednesday, the House voted to impeach President Trump for a second time, though the Senate trial most likely will not begin before his term ends on January 20th.

President-elect Biden unveiled his $1.9T coronavirus spending package. If approved, among other measures, it will provide direct payments of $1,400 to millions of individuals, increase enhanced unemployment benefits from $300/week, to $400/week, raise the minimum wage to $15/hour, extend the federal eviction moratorium from January through September, and provide billions of dollars to state and local governments and schools.

The ongoing surge in new coronavirus cases showed little signs of slowing as cumulative cases in the US increased 1.56M for the seven day period ending Saturday, to a total of 23.8M, while deaths rose another 23.3K, to a total of 395.8K. On Friday, the CDC reported that a new, much more highly transmissible variant of the coronavirus, already detected in 10 states, could become the dominant strain in the U.S. by March. Through Friday, 11 million vaccine doses had been administered, though that figure represented only a third of what has been distributed to states so far.

Economic Bullet Points

Economic data provided further evidence that the ongoing surge in coronavirus cases is having a meaningful impact on labor markets and the consumer.

Headline retail sales registered their third monthly decline, slipping 0.7%.  Core retail sales, which exclude autos, gas, building materials, and food services, fell 1.4%, well below the forecasted 0.1% decline.

Weekly jobless claims jumped 181K to 965K, the highest reading since August.  The consensus forecast had been for an increase of 11K to 795K. Continuing claims rose for the first time in five weeks, climbing from 5.07M to 5.27M.

The combination of rising unemployment and slowing consumer spending bodes ill for 4Q20 economic growth, and the start of 2021. It also adds fresh urgency for Congress and President-elect Biden to quickly pass additional stimulus. The hope is that the additional stimulus, coupled with that which Congress passed in late December, will buoy the economy for the next several months, providing time for millions of COVID vaccines to be administered and economic activity to begin to normalize. Currently, stimulus from the $900B spending bill passed in late December is beginning to filter through the economy as the Treasury issues new direct payment checks of $600 to millions of individuals and banks began lending $284B of new PPP loans this past week.

Of Note

The German Christian Democrat Union selected Armin Laschet as the new leader of their party, positioning him to be Angela Merkel’s successor as Germany’s chancellor.

Market Indices Week of 01/15

S&P 500-1.5%
Small Caps1.5%
Intl. Developed-1.4%
Intl. Emerging0.3%
U.S. Bond Market0.2%
10-Year Treas. Yield1.08%
US Dollar0.7%
WTI Oil ($/bl)$52
Gold ($/oz)$1,829

The Week Ahead

  • Weekly Jobless Claims
  • Housing Starts
  • Existing Home Sales

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