Insights

 

WuRevue Week Ending 12/18/2020

 

Top News:

12/14: Electoral College meetings where Biden will be chosen formally as president garnered attention, given the spat of lawsuits challenging results.  In a memorable first, Pfizer began distributing its vaccine, a welcome development as the coronavirus situation worsens.  Japan’s quarterly business sentiment improved more than expected, though a hazy outlook should spell no change in its ultra-loose monetary policy.

 

12/15: Investors took comfort in the first “meaningful conversation” between the top four congressional leaders in months, following the unveiling of a two-part recovery proposal by bipartisan lawmakers.  Separately, China extended its strong economic momentum in November with an across-the-board recovery.

 

12/16: Despite revising its economic projections higher, the Fed kept rates near zero as well as signaled the highly accommodative stance will likely remain through 2023.  Underscoring the need for additional fiscal support, November retail sales posted a sharper than anticipated decline of 1.1%.  Preliminary December data suggest growth deceleration among private US and Japanese businesses, while those in the Eurozone and the UK saw slight improvement.

 

12/17: US weekly unemployment benefits report highlighted the labor market’s fragility as total first-time claims rose to the highest level since early September.  Meanwhile, anchored by the Fed’s loose stance, homebuilding and permits increased solidly in November.  A FDA advisory panel is slated to recommend emergency authorization of a second US vaccine, which the agency has already deemed “highly effective.”  In the UK, BOE stood pat in its monetary stance, choosing to await results of Brexit negotiations prior to unleashing additional money stimulus.

 

12/18: Investors took their feet off the pedal given the unresolved political stalemate in US Congress (here) and Brexit (here).  As another indication of moderating US economic growth, an index of leading indicators inched higher at the slowest pace in five months in November.

 

 

Heard on the Street:

“Admittedly (price-to-earnings multiples) are high.  But that’s maybe not as relevant in a world where we think the 10-year Treasury is going to be lower than it’s been historically from a term perspective.”

— Jerome Powell, Fed Chairman, in post-FOMC news conference as quoted by CNBC on 12/16/2020

 

“As far as an EU-U.K. trade deal is concerned, it would appear that fishing rights are the last significant obstacle for an agreement to be put to the U.K. parliament sometime in the next week or so, with reports of talks entering a ‘tunnel’ helping the upbeat mood.”

— Michael Hewson, chief market analyst at CMC Markets, quoted by MarketWatch on 12/17/2020

 

 

Longer Game:

As we look ahead to 2021, one market analytics firm highlighted key macroeconomic themes, including: 1) wide availability of vaccines by mid-year spurring GDP growth in second half of the year; 2) continuing accommodative stance of developed countries’ central banks; and, 3) US dollar depreciation vs. major currencies.

 

 

Bonus:

Interested in bitcoin, the latest flavor du jour?  You may want to read this report, prior to buying into the notion that this cryptocurrency is “Gold 2.0.”