The Bottom Line
● On Thursday, the S&P 500 set another record high, and most major equity indexes posted solid results for the week. The technology‐heavy, growth‐oriented Nasdaq led with a +4.2% return and the S&P 500 gained +1.9%.
● Joe Biden became the 46th president of the United States on Wednesday and the S&P 500 posted its best first‐day return for a presidential inauguration since 1937, gaining + 1.4%, alongside global stocks that hit fresh record highs.
● The Philadelphia Fed Manufacturing Index soared to its best level since October and the flash IHS Markit U.S. Manufacturing PMI hit an all‐time high, as factory activity rebounded strongly from December’s lull.
Stocks post solid gains for the week
The major U.S. equity indexes were all able to post solid weekly gains as a contentious Presidential election came to a conclusion with the swearing in of Joe Biden as the 46th president of the United States. The markets appeared unsure at times on how the Biden administration and the new composition of Congress will impact fiscal stimulus, infrastructure spending, the potential for higher taxes and a push for a faster vaccine rollout. But mostly upbeat results in the early stage of earnings season and positive economic news, particularly on the manufacturing front and housing data, helped buoy investors’ confidence. The flash IHS Markit manufacturing PMI hit a record high and the services PMI rebounded as well. Builder sentiment dropped a bit but building permits, housing starts, and existing home sales all topped market expectations. Janet Yellen, former Chair of the Federal Reserve and Biden’s nominee for treasury secretary, advised legislators to go big on the next coronavirus stimulus bill. The CBOE Volatility Index (VIX) dropped to 21.9 from 24.3 the prior Friday, but a very busy economic calendar and the heaviest week of the earnings season may be catalysts for higher volatility next week.
Digits & Did You Knows
HOW LOW CAN IT GO — Inflation, as measured by the Consumer Price Index (CPI), was up +1.4% for 2020. For the decade of the 2010s (1/01/2010 through 12/31/2019), inflation was up just +1.8% per year, the lowest decade of inflation in the U.S. since the 1930s. In contrast, the decade of the 1970s suffered +7.4% annual inflation (source: Department of Labor, BTN Research).
THEY OWN IT NOW — Banks foreclosed on 50,238 homes nationwide in 2020, down ‐65% from 143,955 foreclosures in 2019 and down ‐78% from 230,305 foreclosures in 2018. The worst single year of foreclosures was 2010 with 1,050,500 foreclosures (source: ATTOM Data Solutions, BTN Research).
Source: Bloomberg. Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange‐traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds may be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐YieldBond(iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 ValueETF);MidGrowth(iSharesRussell Mid‐CapGrowthETF);MidValue (iSharesRussell Mid‐Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4%Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.
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