Markets, Economy

Weekly Kickstart (02/15/2021-02/19/2021)

2/16/21 8:00 AM

iStock-626627280.jpgStocks continued higher last week, as the S&P 500 rose by 1.23 percent to 3,934.83. That was yet another new all-time closing high and it left the benchmark index up 4.76 percent 2021-to-date. Following the sharp selloff at the end of January we reiterated how the worst days in the stock market often occur in close proximity to the best days. This again proved to be the case because the following week the S&P 500 gained more than it lost at the end of January, and as mentioned above the index has already returned to record heights. Such price action should not come as a surprise to any of our long-term blog readers, and one reason why we make an effort to repeatedly point out these and other market “tendencies” is because new (inexperienced) entrants are appearing all the time. This was especially true in 2020 when more Americans shifted their focus to the stock market, in part due to a lack of employment, live sporting events, and other activities that would normally occupy their time if not for the lockdowns, and many people even used their $1,200 relief check provided under the CARES Act to jumpstart their investing journey.

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A recent FINRA report similarly found that a 56 percent majority of new investors last year opened an account with less than $2,000 in initial funding. When asked what prompted them to open an account, the responses were very diverse but common themes included “received money,” “wanted to take advantage of dips in the market,” “feared missing out on the rally,” and “talked into doing so by friends and family.” A plurality of new investors, though, encouragingly said that their primary reason for putting money to work in the market last year was to help grow their retirement nest egg. This is a great motivation but unfortunately the FINRA report also revealed that many of the recent market entrants were using non-retirement investment accounts, in turn missing out on all of the tax advantages that come with utilizing a 401(k), IRA, or similar investment vehicle. A possible explanation for this entails a combination of not having access to such savings vehicles and more generally a lack of knowledge about the tax implications of investing. The good news is that some of these issues were likely exacerbated by the economic disruptions of the pandemic and should therefore reverse as the recovery progresses. Moreover, 401(k) access will increase along with the rebound in the labor market, and the continued reinstatement of employers’ matching contributions should further incentivize the use of these investment vehicles over the more tax-exposed alternatives.

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To recap a few of the things we learned about the economy last week, the positives included that total job openings rose, an important gauge of labor market confidence firmed, and household inflation pressures remained muted. As for the negatives, small business owner optimism continued to soften, consumer sentiment deteriorated, and the number of Americans making first-time claims for unemployment benefits remained alarmingly high. This holiday-shortened week the pace of economic data picks up with a few important reports on housing, manufacturing, and consumers scheduled to be released, along with the release of the minutes from the latest FOMC meeting.

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What To Watch:

Monday

  • U.S. Holiday: Presidents Day
  • Markets Closed

Tuesday

  • 3-Yr Note Settlement
  • 10-Yr Note Settlement 
  • 30-Yr Bond Settlement
  • Empire State Manufacturing Index 8:30 AM ET
  • Mary Daly Speaks 3:00 PM ET

Wednesday

  • MBA Mortgage Applications 7:00 AM ET
  • PPI-Final Demand 8:30 AM ET
  • Retail Sales 8:30 AM ET
  • Industrial Production 9:15 AM ET
  • Business Inventories 10:00 AM ET
  • Housing Market Index 10:00 AM ET
  • 20-Yr Bond Auction 1:00 PM ET
  • FOMC Minutes 2:00 PM ET
  • Robert Kaplan Speaks 6:05 PM ET

Thursday

  • Housing Starts and Permits 8:30 AM ET
  • Jobless Claims 8:30 AM ET
  • Philadelphia Fed Manufacturing Index 8:30 AM ET
  • Import and Export Prices 8:30 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • EIA Petroleum Status Report 11:00 AM ET
  • 2-Yr Note Announcement 11:00 AM ET
  • 5-Yr Note Announcement 11:00 AM ET
  • 7-Yr Note Announcement 11:00 AM ET
  • 30-Yr TIPS Auction 1:00 PM ET
  • Fed Balance Sheet 4:30 PM ET

Friday

  • Existing Home Sales 10:00 AM ET
  • E-Commerce Retail Sales 10:00 AM ET
  • Quarterly Services Survey 10:00 AM ET
  • Baker Hughes Rig Count 1:00 PM ET
 

 

Sources: Econoday, FINRA, CNBC, FRBSL

Post author: Charles Couch

Disclosures