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Daily Capital

Weekly Market Digest: Quiet Holiday Trading Closes Wild Year

Global stocks finished a wild year on a positive note, adding to gains in a quiet holiday trading week. Global spread of a new potentially more contagious strain of the virus and slower-than-hoped-for initial start to vaccine rollouts did little to put a damper on enthusiasm for expected growth in 2021 and 2022. Initial jobless claims unexpectedly fell. While Congress continues to debate stimulus relief, many began receiving the latest direct payments for up to $600 per person.

 

 

 

Weekly Returns

S&P 500: 3,747 (+1.2%)

FTSE All-World ex-US (VEU): (+1.4%)

US 10 Year Treasury Yield: 0.91% (-0.02%)

Gold: $1,901 (+1.1%)

EUR/USD: $1.222 (+0.3%)

Major Events

  • Monday – President Donald Trump signed a $900 billion stimulus bill including direct payments to most Americans.
  • Tuesday – Boeings 737 Max returned to service with an American Airlines flight.
  • Tuesday – The Case-Shiller 20-City U.S. home prices rose 7.9% in October from a year ago, the most since 2014. 
  • Wednesday – Colorado officials said they are investigating a possible second case of a new strain of COVID-19. 
  • Wednesday – The UK government outlined plans to move to a stricter tier of lockdowns on millions of people.
  • Thursday – Weekly jobless claims unexpectedly fell to 787,000.

 

Our Take

2020 was unique and dramatic. COVID-19 impacted every person in different and often profound ways. So many families suffered loss, hundreds of thousands of small businesses closed and millions of jobs vanished. A highly charged presidential election divided the country. The killing of George Floyd sparked demands for social justice. Global stocks lost about a third of their value at the outset of the pandemic, before rebounding sharply.

2021 begins with new perspective. Vaccines provide hope the virus will fade. For many, working remotely has had positive aspects. Accelerated digitalization of the economy comes with transition costs but also drives efficiencies and innovations.

Meanwhile, massive stimulus bills and highly accommodative monetary policy have sharply increased money supply and created negative real interest rates. Against this backdrop, stocks posted stronger-than-average gains for 2020 even as S&P 500 earnings fell by more than 10%. 

In a turbulent year, sticking with a diversified strategy has once again been a successful approach. Those who reacted emotionally or attempted to time the market typically fared poorly. Speculators and stock pickers had mixed results. Some are emboldened by gains in high momentum stocks. We urge caution for those concentrated in individual companies without ample consideration of price or who are using leverage. 

For the world, hopefully brighter days are ahead. There are lingering questions about the effectiveness of vaccines and how long immunity may last, and the pandemic has permanently changed consumer and corporate behavior in many ways. Still, economic activity should return to being unrestricted soon and earnings growth should follow.

Uncertainty remains elevated from a year ago, and pockets of greed and froth suggest it may be easier than usual to make mistakes. But monetary and fiscal policy remain supportive of equities. For diversified investors, value and international stocks in general remain largely ignored and continue to offer opportunity. 

All of us at Personal Capital wish you a safe and prosperous New Year. 

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Craig Birk leads the Personal Capital Advisors Investment Committee and serves as Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.
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