The Week on Wall Street
Stocks moved higher during a
holiday-shortened week of trading, capping off a turbulent, but otherwise strong year for equity
investors.
The Dow Jones Industrial Average gained 1.35%, while the Standard & Poor’s 500 increased by 1.43%. The Nasdaq Composite index, which led all year, added 0.65%. The MSCI EAFE index, which tracks developed overseas stock markets, rose 2.02%.[1][2][3]
The Year in Brief
The global pandemic disrupted economies, financial markets,
and daily life in 2020. Households and businesses were put to the test during the toughest and
grimmest years in decades. The winter brought a resolution to the U.S.-China tariff dispute, the
Brexit referendum, and the first U.S. appearance of the novel coronavirus. As spring started, abrupt
stay-at-home orders in response to COVID-19 curtailed business activity, which dampened consumer
spending. The federal government responded, arranging stimulus payments for millions of Americans.
Wall Street bounced back from its March downturn, but the economy limped along. The pandemic entered its worst phase in fall, but two highly promising vaccines were announced in November, and as winter started, they began to roll out to the public. On the cusp of 2021, Congress approved a second national economic stimulus, and the European Union and United Kingdom signed off on a post-Brexit trade deal.
There are many unanswered questions as we enter 2021. Will mass vaccination happen as quickly as we anticipate? Will a successful vaccination program lead to more hiring, more travel, more in-store shopping, and more confidence? The financial markets will be watching progress on this effort.
The U.S. Economy
The pandemic sent the U.S. economy into an abnormal phase, and
so our fundamental economic indicators displayed atypical readings.
The Department of Labor's main jobless rate, 3.5% in February, hit 14.7% by April. Headline unemployment declined for the next seven months, to 6.7% by November. The U-6 unemployment rate, measuring unemployment and underemployment, peaked at 22.8% in April.[4][5]
As people stayed home, consumer spending trended lower, falling 6.9% in March and 12.6% in April.[6]
The federal government moved to boost economic activity. As March ended, a $2 trillion economic stimulus bill became law, featuring cash payments to households, temporary increases in federal unemployment benefits, and a Small Business Administration program pledging to offer distressed companies funds equivalent to 8 weeks of payroll costs. The aid began rolling out in April, and in May, the White House unveiled Operation Warp Speed, a public-private partnership intended to produce COVID-19 vaccines in record time. Two vaccines were approved by the Food and Drug Administration by fall.[7][8]
The Federal Reserve took the benchmark federal funds interest rate down to a target range of 0-0.25%, and revived emergency loan programs first introduced in 2008. It collaborated with the Department of the Treasury on efforts to buy corporate bonds and encourage business loans. In a monetary policy shift, the central bank said in August that it would accept average inflation of 2% for the near term, and was willing to tolerate a little more inflation in the economy while pursuing the goal of full employment.[9][10]
As stay-at-home orders lifted, the economy rebounded. Gross domestic product, which the Bureau of Economic Analysis said had contracted 31.4% in the second quarter, grew 33.4% in Q3. The BEA also recorded a 41.0% Q3 climb for consumer spending. Stay-at-home orders returned in Q4, however, prompting another federal economic stimulus in December.[11]
The housing market stayed strong. By November, existing home sales were up 25.8% year-over-year, according to the National Association of Realtors; Census Bureau data showed a 20.8% annualized improvement for new home buying.[12][13]
The U.S.-China tariff dispute eased throughout the year. In the January 2020 trade talks, the U.S. promised to lessen import taxes on Chinese goods, and China agreed to buy more American exports.[14]
The Global Economy
The International Monetary Fund expects the world economy
will contract 4.4% in 2020. If that estimate holds, 2020 will be the worst year for global growth
since the 1930s. The U.S. economy shrank 4.3% in 2020, according to the IMF's forecast. That is better
than the 8.3% setback estimated for the eurozone. The IMF projects that China's economy grew 1.9% last
year. As for 2021, it sees GDP advances of 8.2% for China, 5.2% for the eurozone, and 3.1% for the
U.S.[15][16]
The European Union and United Kingdom agreed to a post-Brexit trade deal on December 24. This completed the Brexit process, which began with the 2016 leave vote and included the U.K.'s formal exit from the E.U. last January. Businesses and financial firms based in the U.K. now face new trade rules and costs, even with the new pact in place.[17]
Looking at stock benchmarks around the world, there were more ups than downs. South Korea's Kospi Composite stood out with a 30.75% 2020 gain. Argentina's MERVAL climbed 22.93%, Taiwan's TWII 22.80%. Two other notable 2020 advances: Japan's Nikkei 225 added 16.01%, and China's Shanghai Composite rose 13.87%. There were also notable retreats: Indonesia's IDX Composite lost 5.09%, France's CAC 40 7.14%, Russia's RTS 10.42%, and Spain's IBEX 15.45%. The MSCI EAFE index, a broad benchmark tracking developed-economy stock market performance in Europe and Asia, rose 5.43%.[18][19]
Final Thoughts
We join all Americans in happily drawing the curtain on 2020.
Though it was a challenging and tragic year for so many, there are good reasons to believe that 2021
will be a year of progress in returning to our pre-pandemic normal. We wish you and your family a
healthy and happy new year!
THIS WEEK: KEY ECONOMIC DATA
Tuesday: Institute for Supply
Management (ISM) Manufacturing PMI (Purchasing Managers Index).
Wednesday:
Automated Data Processing (ADP) Employment Change, Factory Orders.
Thursday:
Initial Jobless Claims, ISM Non-Manufacturing PMI.
Friday: Employment Report.
Source: Econoday, December 31, 2020
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
Thursday: Micron
Technologies (MU), Constellation Brands (STZ), Walgreens Boots (WBA), Conagra Brands (CAG)
Source: Zacks, December 31, 2020
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.
Investing involves risk including the potential loss of principal. No investment strategy can
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International investing involves special risks such as currency fluctuation and political
instability and may not be suitable for all investors.
The Standard & Poor's 500
(S&P 500) is an unmanaged group of securities considered to be representative of the stock
market in general.
The Dow Jones Industrial Average is a price-weighted average of 30
significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by
Charles Dow back in 1896.
The 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 stocks of technology companies and growth companies.
The MSCI EAFE Index
was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the
performance in major international equity markets as represented by 21 major MSCI indices from
Europe, Australia, and Southeast Asia.
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investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Opinions expressed are subject to change without notice and are not intended as investment advice or
to predict future performance.
Past performance does not guarantee future
results.
You cannot invest directly in an index.
Consult your financial
professional before making any investment decision.
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.
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are the views of Platinum Advisor Strategies, LLC, and not necessarily those of the named
representative, Broker dealer or Investment Advisor and should not be construed as investment
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The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. 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 Wall Street Journal, December 31, 2020
- The Wall Street Journal, December 31, 2020
- The Wall Street Journal, December 31, 2020
- Trading Economics, January 2, 2021
- CNN Business, May 8, 2020
- Investing.com, January 2, 2021
- Los Angeles Times, December 18, 2020
- Treasury.gov, January 2, 2021
- New York Times, December 23, 2020
- Reuters, August 27, 2020
- The Balance, December 27, 2020
- Reuters, December 22, 2020
- Census Bureau, December 23, 2020
- NPR, January 15, 2020
- Seattle Post-Intelligencer, December 31, 2020
- CNN Business, October 13, 2020
- The Week U.K., December 23, 2020
- Barchart.com, December 31, 2020
- Wall Street Journal, January 1, 2021