Insights

WuRevue Week Ending 01/01/2021

Top News:

12/28: Avoiding a government shutdown and providing additional Covid assistance, the Administration signed the $2.3T spending and recovery bill, despite earlier posturing to the contrary.  Another significant near-term market headwind was lifted as well, when the EU-UK clinched a Brexit deal on Christmas Eve, after four years of talks.  US holiday retail sales, driven by online commerce, saw an annual growth rate of 3%, according to one estimate.

 

12/29: A quarterly private survey of Chinese businesses showed a tepid outlook as roughly two-thirds polled said they do not expect a return to 2019 levels until at least three months from now.  Driven by demand as a result of record low interest rates, home prices in 20 large US cities rose at a 7.9% yearly pace in October.

 

12/30: The UK approved the joint vaccine developed by AstraZeneca and University of Oxford, the third to receive the greenlight after peer reviews.  China reached an investment agreement with the EU, even if some question its substantive economic impact.

 

12/31: Decelerating modestly in December, China remains on track to be the only major economy to show positive GDP growth in 2020.  Latest weekly initial and continuing jobless claims decreased, yet they remain at elevated levels when compared with the year-ago period. Hiccups in the rate of vaccination amplified concerns over reports of the more contagious UK variant in the US.  Prolonging the long-running dispute over subsidies to aircraft manufacturers, US ratcheted up tariffs on $7.5 billion worth of European products. 

 

 

Heard on the Street:

“Market historians looking back to another incredible year – 1999 – in which the S&P 500 closed the year at a new all-time high, will recall that the initial few days of the year 2000 saw a vicious correction. Yes, times were different, and the focus then was on Y2K and the concentrated bubble of the time, but investors need a reminder that even during major bull market runs, one can see significant set-backs.”

— John Hardy, Head of FX Strategy at Saxo Bank, in a market update on 12/28/2020

 

“To be frank, buying gold or silver is not a contrarian investment position today… There are enough people in agreement with the idea that all government backed fiat currencies are doomed to some level of devaluation through inflation due to the level of fiscal and monetary imprudence and unsustainable debt imbalances in the financial system.”

— Kevin Smith, CIO of Crescat Capital in its December note

 

 

Longer Game:

How should the US and EU deal with China’s technological rise?  Hank Paulson’s think tank highlighted areas of cooperation in order to support “liberal democracy” and blunt “rival systems of digital governance”: 1) building a shared digital infrastructure; 2) harmonizing export control of sensitive technologies; and 3) connecting the developing world with the US-EU ecosystem of standards. 

 

 

Bonus:

In its December survey of 984 global market professionals, Deutsche Bank found issues relating to Covid, tech valuations, and premature withdrawal of government stimulus programs as their top concerns in 2021.