Markets, Economy

Weekly Kickstart (11/30/2020-12/04/2020)

11/30/20 8:00 AM

iStock-626627280.jpgStocks continued higher last week, as the S&P 500 rose by 2.27 percent to 3,638.35. That was a new all-time closing high and it left the benchmark index up 12.62 percent 2020-to-date. One should not read too heavily into last week’s price action because there were only three and a half trading days and volume was very low due to the Thanksgiving holiday. As for full-month performance, the S&P 500 appears on track to end November with a gain of 11.27 percent, assuming no change today. That would be the largest increase since April and a welcome turnaround following the back-to-back declines in September and October. There have been only four other occasions since 1928 that the S&P 500 has posted a double digit return in November, and in three of those instances the broad index continued higher in December. The one down month, though, was large enough to pull the overall average performance into negative territory (-0.21 percent).

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Things improve three months out, with the S&P 500 rising by an average of 2.75 percent following such a strong November. However, it is worth reiterating that this particular sample size is very small and therefore other seasonality could be at play. For example, December has been a positive month for equities 74 percent of the time since 1928, and such strength has carried through into January 63 percent of the time. Moreover, with average gains of 1.33 percent and 1.25 percent, respectively, December and January have historically represented the best 2-month period for stocks. Of course past performance does not guarantee future returns, and 2020 in many ways has been anything but typical. This is not just because of the pandemic but also because it is an election year, and in the immediate future any favorable seasonality could easily be ignored as traders wait to see what happens with the winter wave of the coronavirus, the Georgia runoff, or various other unknowns still looming over the market. Any regular investors uncomfortable with a potential uptick in volatility should therefore consider using the November rally as another opportunity to review their positioning and make sure it is properly aligned with their risk tolerance, nearness to retirement, and other unique variables. These periodic reviews can help identify potential portfolio imbalances ahead of time rather than waiting until the market has already moved against you and your options feel much more limited. As always, we are here to help with any questions you may have.

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To recap a few of the things we learned about the economy last (holiday-shortened) week, the positives included that mortgage applications rose, home values continued to appreciate at an accelerating rate, demand for American-manufactured durable goods jumped, and core capital expenditures, an important proxy for U.S. business investment, increased by more than forecast. As for the negatives, new home sales declined (albeit from a sharply upward-revised print), regional manufacturing activity cooled, consumer confidence softened, the savings rate declined (to prop up consumption), and an alarmingly high number of Americans continued to make first-time claims for unemployment benefits. This week the pace of economic data picks up with several important reports on housing, construction spending, factory output, service sector activity, and employment scheduled to be released, including the potentially market-moving November job report from the U.S. Labor Department due out on Friday.

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What To Watch:

Monday

  • 2-Yr Note Settlement
  • 5-Yr Note Settlement 
  • 7-Yr Note Settlement
  • 10-Yr TIPS Settlement
  • 20-Yr Bond Settlement
  • Chicago PMI 9:45 AM ET
  • Pending Home Sales Index 10:00 AM ET
  • Dallas Fed Manufacturing Survey 10:30 AM ET

Tuesday

  • PMI Manufacturing Final 9:45 AM ET
  • ISM Manufacturing Index 10:00 AM ET
  • Construction Spending 10:00 AM ET
  • Jerome Powell Speaks 10:00 AM ET
  • Lael Brainard Speaks 11:00 AM ET
  • Mary Daly Speaks 1:15 PM ET
  • Charles Evans Speaks 3:00 PM ET

Wednesday

  • Motor Vehicle Sales
  • MBA Mortgage Applications 7:00 AM ET
  • ADP Employment Report 8:15 AM ET
  • John Williams Speaks 9:00 AM ET
  • Randal Quarles Speaks 9:00 AM ET
  • Jerome Powell Speaks 10:00 AM ET
  • EIA Petroleum Status Report 10:30 AM ET
  • John Williams Speaks 1:00 PM ET
  • Beige Book 2:00 PM ET

Thursday

  • Challenger Job-Cut Report 7:30 AM ET
  • Jobless Claims 8:30 AM ET
  • PMI Composite Final 9:45 AM ET
  • ISM Services Index 10:00 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • 3-Yr Note Announcement 11:00 AM ET
  • 10-Yr Note Announcement 11:00 AM ET
  • 30-Yr Bond Announcement 11:00 AM ET
  • Fed Balance Sheet 4:30 PM ET

Friday

  • John Williams Speaks 8:05 AM ET
  • Employment Situation 8:30 AM ET
  • International Trade in Goods and Services 8:30 AM ET
  • Charles Evans Speaks 9:00 AM ET
  • Factory Orders 10:00 AM ET
  • Baker Hughes Rig Count 1:00 PM ET
 

 

Sources: Econoday, FRBSL

Post author: Charles Couch

Disclosures