U.S. stock markets remained calm as a fresh chapter opened in the coronavirus stimulus saga last week.
Congress managed to cobble together a new stimulus package that was acceptable to both parties and pass it. The proposed package includes money to help states distribute vaccines, an extension of unemployment benefits, $600 checks for eligible Americans, aid for airlines and other provisions, reported Mike Calia of CNBC.
“…fiscal support is seen as critical to keep the economic recovery from faltering as coronavirus cases rise and cities consider new shutdowns. Consumer spending has flagged\ and labour market gains have begun to stall. While the number of Americans applying for unemployment benefits declined last week, it still remains elevated compared with pre-COVID levels,” levels remain elevated compared with pre-COVID levels,” reported Colby Smith and Eric Platt of Financial Times.
President Trump disagreed with some provisions in the bill. Over the weekend, it was unclear whether he would sign the bill, veto it or just hold it without taking action.
Since the $900 billion stimulus bill was attached to the $1.4 trillion government funding bill, the impact of a veto or inaction could be quite significant. Daren Fonda of Barron’s reported, “Without Trump’s signature, the government may partially shut down on Tuesday as funding runs out, though Congress could pass a stopgap measure.”
Stock investors appeared optimistic President Trump would sign the bill. News of a Brexit trade deal and a more contagious version of the virus in the United Kingdom had limited impact on U.S. markets.
All-in-all it was a quiet holiday week and major U.S. indices finished with mixed results.
Data as of 12/24/20
Standard & Poor's 500 (Domestic Stocks)
Dow Jones Global ex-U.S.
10-year Treasury Note (Yield Only)
Gold (per ounce)
Bloomberg Commodity Index
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, MarketWatch, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
THERE WILL ALWAYS BE RISKS. After a year of living with the fear of COVID-19, many investors are hoping 2021 will bring a return to normal, even if the new normal is not quite the same.
According to most of the sentiment surveys listed in Barron’s last week, optimism about the future has many investors feeling bullish. Financial Times reported, “Almost universally, fund managers believe the year will bring a rebound in economic activity, supporting assets that have already soared in value since the depths of the pandemic crisis in March, but also lifting sectors that had been left behind. Bond yields are expected to stay low, lending further support to stock valuations.”
This does not mean that 2021 will be risk free. In its December market sentiment survey, Deutsche Bank asked more than 900 market professionals about the biggest risks to global financial markets in 2021. Here are some concerns they highlighted:
- 38 percent worry that the virus will mutate and vaccines will become less effective
- 36 percent wonder whether side effects will emerge
- 34 percent believe that many people will refuse to take the vaccine
- 34 percent are concerned the technology bubble will burst
- 26 percent fear that central banks might end economic stimulus programs too soon
- 22 percent think inflation will increase earlier than expected
It’s possible none of these will occur and investors will sail smoothly into the new year. We hope that’s the case and next year brings a return to a some sort of normal. Just remember, “normal” will never mean risk-free. Investors will still need to balance risk and reward on the journey toward their financial goals – just as they do every year.
Weekly Focus – Think About It
“Qualities you need to get through medical school and residency: Discipline. Patience. Perseverance. A willingness to forgo sleep. A penchant for sadomasochism. Ability to weather crises of faith and self-confidence. Accept exhaustion as fact of life. Addiction to caffeine a definite plus. Unfailing optimism that the end is in sight.
--Khaled Hosseini, novelist
Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Treiberg Wealth Management, a registered investment advisor and separate entity from LPL Financial. 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 DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices. The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association. The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. This newsletter was prepared by PEAK. Past performance.