Weekly Market Insights: Markets Start 2021 on a High

Weekly Market Insights: Markets Start 2021 on a High

January 11, 2021
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Good afternoon from Aliso Viejo, California, this Monday, January 11, 2021.  As I compose our first Weekly Market Insights of the new year I hope this edition finds you and your family doing well.  I also hope that you find our first edition of 2021 to be informative and insightful.  Rest assured, I am committed to keeping you abreast of meaningful market, economic, and legislative developments as they'll occur throughout the coming year.  As much as I enjoy writing I am also committed to not clogging your inbox and to that end, while we'll continue to refer to this communication as our Weekly Market Insights, I'll endeavor to limit editions to monthly or weekly when there are meaningful items to report.  I'm also adding some fun sections, which will change from time-to-time, such as "Healthy Living Tips" and "Photo(s) of the Week".  If you know me you know I like to travel so this edition's photo is one of mine.  If you have one you'd like to share please send it along and I'd be glad to potentially include it in one of our upcoming editions. 

On behalf of all of us here at Redefine Financial we greatly appreciate the confidence you place in us and promise to continue to do our very best to be the prudent stewards you expect and deserve.  Now, down to business:  

While the markets closed slightly lower today, the DOW gave up -89.28 and the S&P 500 - 25.07, last week stocks powered higher to kick off a new year of trading, shrugging off COVID-19 infections and the disruption at the Capitol on January 6th.  The Dow Jones Industrial Average gained 1.61%, while the Standard & Poor’s 500 increased by 1.83%. The Nasdaq Composite index, which led throughout 2020, picked up 2.43%. The MSCI EAFE index, which tracks developed overseas stock markets, rose 1.45%.1,2,3

Fireworks to Start the New Year

Last week stocks got off to a slow start amid the stuttering pace of vaccine distribution and concern that the economic recovery might take longer than anticipated. Uncertainty over the looming Senate runoff election in Georgia added to the broad retreat that marked the first day of 2021 trading.

From there markets turned higher, aided by firming oil prices with subsequent support provided by the Georgia Senate election results, which lifted hopes of additional fiscal stimulus. Stocks managed through political unrest mid-week, with banks, economically sensitive stocks, and technology shares leading the way.

The yield on the 10-year Treasury rose above 1% for the first time since March as investors fled bonds in anticipation of new federal borrowing.4

Stocks touched all-time highs on the final trading day, capping a strong week of performance.5

Employment Picture 

The U.S. economy lost 140,000 jobs in December, confirming fears of economic slowdown brought on by a resurgence of COVID-19 infections.

Not surprisingly, it was restaurants and bars that saw the greatest job losses, with the larger hospitality sector accounting for nearly all the job losses last month. Meanwhile, November job creation was revised upward, from 245,000 to 336,000.6

To help put the pandemic in perspective, December’s job report capped the worst year for job losses since the tracking began in 1939. The unemployment rate remained unchanged at 6.7%.7

This Week: Key Economic Data

Tuesday: Job Openings and Labor Turnover Survey (JOLTS).

Wednesday: Consumer Price Index (CPI).

Thursday: Initial Jobless Claims.

Friday: Retail Sales, Consumer Sentiment, Industrial Production.

Source: Econoday, January 8, 2021
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

This Week: Companies Reporting Earnings

Tuesday: KB Home (KBH)

Thursday: Blackrock (BLK)

Friday: JPMorgan Chase (JPM), Citigroup (C), PNC Financial (PNC)

Source: Zacks, January 8, 2021
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

“Fun is a good thing, but only when it spoils nothing better.”

– George Santayana

LEGISLATIVE UPDATE

As the election season draws to a close, it's a great time to review what type of legislative support would be needed to pass certain policy proposals that may come forward from the Biden Administration.

It's important to remember that legislative changes take time, and it remains unclear what initiatives may take priority in the months ahead, especially with the ongoing pandemic.

It would also be foolish to think that the 117th United States Congress won't move forward with some new ideas and proposals. As has been said, "elections have consequences."

Here's a closer look at some of the policy proposals and what they require to pass:

  • Repealing the 2017 Tax Cuts and Jobs Act. This type of legislation would need the approval of the House of Representatives and 51 Senate votes.8

  • Increasing capital gains taxes. Legislation of this nature also would need the approval of the House of Representatives and 51 Senate votes.8

  • Providing additional fiscal stimulus, such as $2,000 checks. For this type of measure, legislation would need to move through the House and get 60 Senate votes.8

  • Evaluate China tariffs, other tariffs. The president can use his executive authority to move these concepts forward.8

If you are concerned about one or more of these potential policy initiatives, please give us a call. We'd welcome the chance to hear your perspective, and hopefully, we can provide some guidance.

Stay Healthy During Flu Season

This flu season, it’s more important than ever to stay healthy. Fortunately, with a few simple steps, you may reduce your risk this flu season.

  • Get the flu vaccination: The Centers for Disease Control estimates that last year, fewer than half of all Americans got the flu vaccine. While getting the vaccine may not prevent you from getting a strain of the flu, it may help you avoid one of the other strains. This is especially important for anyone with a chronic health condition, and for those who are 65 years of age and older.
  • Wash your hands: Handwashing remains one of the most effective ways to prevent the flu. Wash your hands with soap and water for at least 20 seconds, and wash your hands often.
  • Disinfect: Disinfect objects that you touch every day, like doorknobs, your car’s steering wheel, and other household items that you use regularly.

While this information should not substitute for medical advice from your healthcare provider, implementing better habits, like frequent handwashing, wearing a face mask, and avoiding anyone who is ill, may help you and your loved ones stay healthy this flu season.

Tip adapted from Centers for Disease Control and Prevention9

Yesterday was Wednesday’s tomorrow. Tomorrow is Sunday’s yesterday. Given those circumstances, what day would today be?

Last week’s riddle: The railings on a 60-yard-long walkway have ornamental sculptures every 12 yards on both sides, starting at the east and west ends of the walkway. How many total sculptures are there on the walkway?  Answer: 12 sculptures total, as there are 6 per side if they occur every 12 yards (0-12-24-36-48-60).

Pictured here is one of my favorite locations, the Alabama Hills and Whitney Portal just off state highway 395 near Lone Pine, CA.  Here you'll discover amazing scenery, camping, hiking, and even the set locations for many T.V. commercials, shows, and epic Hollywood films.

Feel free to email us your favorite photo and we may feature it in one of our upcoming Weekly Market Insights. Please provide some insight relating to the background and the location that we might be able to share with our readers.

Footnotes and Sources

 

1. The Wall Street Journal, January 8, 2021

2. The Wall Street Journal, January 8, 2021

3. The Wall Street Journal, January 8, 2021

4. The Wall Street Journal, January 6, 2021

5. CNBC, January 8, 2021

6. The Wall Street Journal, January 8, 2021

7. The Wall Street Journal, January 8, 2021

8. WStreet.com, January 8, 2021

9. CDC.gov, September 25, 2020

Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.

The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Please consult your financial professional for additional information.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Copyright 2021 Redefine Financial, LLC