The Bottom Line
● Stocks advanced again this week with the S&P 500 up another +1.2% and closing at its 10th record high of the year. Small company stocks performed even better, gaining +2.5% to put them up nearly +16% in 2021.
● As stocks hit record highs, stock volatility fell to pre‐pandemic levels. The Cboe Volatility Index (VIX), known as the “fear gauge“, closed under 20 for the first time since February 21, 2020.
● Bond yields also reached levels not seen since before the pandemic. The yield on the 10‐year U.S. treasury closed Friday at 1.21% and the 30‐year U.S. treasury hit 2.01%, both above levels not seen since February 2020.
Another Friday, another set of new highs
For the second consecutive week U.S. stocks finished with another round of record closes. The major averages’ all‐time highs came with gains of +1 to +2% for the week, while small company stocks gained +2.5%. At only the 7‐week mark into the new year, the S&P 500 has already made 10 all‐time closing highs and is up nearly +5%. The technology‐heavy Nasdaq is up almost +10% and the Russell 2000 small cap index has gained more than +15%. Small company stocks have now outperformed large caps in 5 of the last 6 weeks and12 ofthelast14. Investors have been buoyed by optimism around additional stimulus spending and reassurance from Fed Chairman Jerome Powell that monetary policy support will persist. Progress has been good on the COVID front, as case counts and hospitalizations continue to decline, nearly 10% of Americans have received at least one dose of the coronavirus vaccines available, and the Biden administration announced it had sourced an additional 200 million vaccine doses. On the earnings front, with 75% of S&P 500 companies reported, earnings growth is up +6.4%, a huge improvement from the decline of more than ‐9% expected at the end of December.
Digits & Did You Knows
MORE THAN INFLATION – Wages and salaries in the private sector increased +2.8% during 2020. Wages and salaries in the public sector (i.e., local and state government workers) increased +1.8% in 2020. Inflation, as measured by the Consumer Price Index (CPI), was up +1.4% for calendar year 2020 (source: Department of Labor, BTN Research).
JUST 1 OF 50 STATES IMPROVED –‐ The unemployment rate in 49 of 50 US states increased between December 2019 and December 2020. Hawaii had the greatest jobless rate jump (rising from 2.7% to 9.3%). South Dakota was the only state to report a decrease last year, falling from 3.4% to 3.0%(source: Bureau of Labor Statistics, 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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