The stock market and the economy don’t always move parallel. Going back to Stock Market/Economy-101, you’ll find it’s suggested, the stock market precedes the economy by 6 months. The current level of the market suggests robust corporate profits and economic growth 6 months, June 2021.
We’ve been told we’re approaching the absolute worst of the Coronavirus. Watching the news, it certainly appears we are quickly moving in that direction. We’re seeing some lockdowns reinstated around the country and we should expect more, fairly quickly. At the same time, we are going to begin distributing the vaccine to millions of people around the world.
Will the stock market hold up over the next few months? Current market levels suggest yes, anticipating the vaccine distribution process will be smooth and timely. We know job creation has recently slowed after a surge and we can now expect more layoffs due to increased lockdowns. We’ll see continued spikes in daily infections and deaths. In addition, we have the Senate run-off on January 5th which certainly has implications, and an overall change of the guard, right smack in middle. In addition, Republicans and Democrats still can’t agree on additional fiscal stimulus. What are you waiting for?! More small businesses to go under, more people to become unemployed, etc.?
Markets for the Week
Last week the major indexes hit new record highs as the Dow moved higher by 1.16%, the S&P 500 1.72%, the Nasdaq 2.14% and the Russell 2000 2.04%. Growth stocks are beating value stocks, year to date by about 10 to 1. In December however, value is beating growth by 2 to 1 reflecting confidence our economy is truly going to reopen.
Bond prices moved lower as the 10-Year US Treasury yield increased to .97%. On 9/30/20 the 10-year yield was .68%. Increasing Treasury yields may have some bond investors experiencing whiplash if yields move from .97 to 1.25%, then to 2%.
Is your bond allocation properly positioned based on your needs and circumstances? We would be happy to discuss with you! Please feel free to schedule a consultation, which can be done via Zoom or a phone-call. We have temporarily suspended all in-person consultations and appointments until further notice.
A Year from Now
I’m someone who always contemplates the future. What do I want, and what needs to happen to make that come to fruition?
12 months from now, a lot will have happened. Some expected, and some not! I’m hoping for a complete eradication of Covid-19, and an economy that has healed and is growing responsibly. An economy that is growing responsibly provides opportunity for all who are truly willing to work hard. I love watching and seeing people succeed from good, honest, hard-work and ingenuity.
That is what made this country great and hopefully will continue to keep us great!