Barring something crazy happening, this will be the last edition of Market Musings until 2021 as people break for the holidays. Of course, we are talking about 2020 here, so I guess nothing is off the table. We hope each of you who regularly read this blog have a Merry Christmas and a safe New Year! On to the last market thoughts for the year…
• Typical, Ho-Hum Week. The last trading week of the year is one typically marked by low trading volumes and little market movement in either direction. Again, it’s 2020, so those norms could easily be broken. A Brexit deal has just been announced, which takes uncertainty away from international trading. Markets typically like certainty, not uncertainty. Under the deal, and more details are to come, but trade between the U.K. and the E.U. will continue worth $909 billion. Congress and the White House are still working on the COVID stimulus package that passed Congress earlier this week, but the small amount of checks to individuals ($600) and the laundry list of “pork” included in the bill is astounding. The poverty line in the U.S. is between $12,000 and $16,000 in annual earnings. Stimulus checks of $600 will not move the needle in either direction – especially for people that have been put out of work by draconian lockdown measures. It would be better for the overall economy to re-open states and let small businesses get back to work providing goods/services and employing people.
• Economic Data Mixed. While we’ve definitely hit a soft patch in the economic data, there aren’t many releases next week and the data was mixed this week, setting the stage for little market movement based on the fundamentals. Third Quarter GDP was revised higher from 33.1% to 33.4%. Redbook weekly retail sales showed some improvement (-0.9% this week vs. -2.2% the previous week) and sales are actually improved over this same time last year (+6.5%) making the case that Holiday Sales may be enough to keep most retailers in business. Weekly Jobless Claims surprised everyone as claims fell to 803,000 versus 885,000 expected and were down 10% from last week’s level. Consumer Sentiment in December, while less than expected, was actually improved over November’s level. The National Financial Conditions Index was little changed, indicating the economy is stable for the time being. Consumer Confidence, Personal Income, and Consumer Spending all disappointed and were lower than the previous month’s readings, as consumers worry about business closures. New Home Sales dipped to 841,000 units from October’s level of 945,000 units. However, we typically see a dip in sales in November and December as the cold months “chill” buyers’ momentum. Housing has been hot this year and the dip in November is similar to dips in 2019, 2018, & 2017.
• COVID: “Clark, that’s the gift that keeps on givin’ the whole year.” The good news is that new cases of COVID seem to be stabilizing, overall. The 7-day average of new cases has rolled over. The positivity rate for new cases has been down or flat for the last 13 days. The mortality rate is still low (1.8%) and new cases are flat or falling in 46 U.S. states/territories. The U.S. government has ordered enough doses of the Pfizer & Moderna vaccines to inoculate 200 million people by July of 2021. Meanwhile, at least 1.1 million people in the U.S. have already been vaccinated for COVID as of yesterday. Between the continued delivery of the vaccines and herd immunity, we should see a considerable decline in COVID cases & deaths in 2021.