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Current Market Observations

February 2, 2021 | Uncategorized

by William Henderson, Vice President / Head of Investments
Uncertainty from Washington and continued sloppy and inefficient roll out of the COVID-19 vaccine put pressure on the markets last week and all three major averages posted negative returns for the week. The Dow Jones Industrial Average returned -3.3%, the S&P 500 Index -3.3% and the NASDAQ -3.5%. The returns from last week moved the averages into mixed territory year to date. With the Dow Jones Industrial Average and S&P 500 Index both with negative year-to-date returns at -2.0% and -1.0% respectively, while the NASDAQ remains positive for the year at +1.4%. The 10-year U.S. Treasury note moved down two basis points to close the week at 1.07%.

President Biden’s latest stimulus plan calls for a $1.9 trillion package. The counter-offer stimulus plan from Senate Republicans called for a smaller $600 billion package. Whichever is the outcome, the result is clear, more government stimulus money is on the way to consumers and the economy.    

Economic data released last week was mixed with 4Q real GDP rising only 4.0%, which was less than the 5.5% some economists had predicted. However, capex was a strong +13.5% and housing up a stunning +33.5% for the quarter. Clearly, investment is driving the economy, and everyone is looking ahead to the successful widespread distribution of the COVID-19 vaccine. Last week, Fed Chairman Jay Powell was quoted stating the obvious to the investment community: “the key to growth will be the vaccine rollout.”   

Last week we saw some interesting trading in the markets as retail investors handed the hedge fund community losses in a few widely traded short sells. Tailwinds of consumer reserves, Fed liquidity, further government stimulus, and a successful vaccine from at least four pharmaceutical firms outweigh the economic headwinds. Stay diversified and stick to your long-term financial plan. 

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