Markets, Economy

Weekly Kickstart (12/14/2020-12/18/2020)

12/14/20 8:00 AM

iStock-626627280.jpgStocks pulled back last week, as the S&P 500 fell by 0.96 percent to 3,663.46. That still left the benchmark index up 13.39 percent 2020-to-date, and just 1.05 percent below the all-time closing high. Uncertainty around the next fiscal relief package remained the key driver of market volatility during the past few trading sessions, and this could again be the case this week because as of this writing no deal has been reached and instead all lawmakers have been able to accomplish so far is pass another continuing resolution to temporarily avoid a government shutdown and buy themselves more time for negotiations. Monetary policy was also on investors’ minds last week as the European Central Bank announced a few new measures to support economic growth and financial conditions in the region. A similar announcement will come from the Federal Reserve this week and although no major policy shifts are currently expected the FOMC could still make adjustments if it feels the additional economic stress brought about by the winter wave of the coronavirus warrants such a move.

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Perhaps more importantly investors will be eager to see if the committee makes any significant changes to its quarterly Summary of Economic Projections in light of the recent news that a deployment of COVID-19 vaccines will likely begin in coming weeks. Moreover, a brighter (or at least less gloomy) economic outlook could be interpreted by traders to mean that rates will not stay near zero for as long as previously anticipated (priced in). Fed officials, though, are well aware of the market’s heightened sensitivity to forward guidance so the committee for now may keep its dovish tone and continue to stress that monetary policy will remain highly accommodative for the foreseeable future. However, the above-mentioned issues are just a few of the various unknowns left for the market to overcome in the near-term, so even though these last few weeks of the year have historically had a bullish tilt, another uptick in volatility is still very much a possibility. Any regular investors uncomfortable navigating this environment should consider reviewing their positioning to make sure it is properly aligned with their risk tolerance, nearness to retirement, and other unique variables. Additional assistance is available by consulting with a professional financial advisor and 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 week, the positives included that productivity growth in the third quarter was revised higher, wholesale and household inflation pressures remained muted, consumer confidence firmed, the number of job seekers per vacancy continued to decline, and revolving credit (consumers’ credit cards) expanded for the first time since the pandemic began. As for the negatives, mortgage applications decreased, small business owner optimism moderated, a gauge of labor market sentiment softened, and the number of Americans making first-time claims for unemployment benefits jumped by the most since March. This week the pace of economic data picks up slightly with a few important reports on manufacturing, housing, employment, and consumer spending scheduled to be released, along with the potentially market-moving announcement on monetary policy from the Federal Reserve on Wednesday.

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What To Watch:

Monday

  • Nothing significant

Tuesday

  • 3-Yr Note Settlement
  • 10-Yr Note Settlement 
  • 30-Yr Bond Settlement
  • FOMC Meeting Begins
  • Empire State Manufacturing Index 8:30 AM ET
  • Import and Export Prices 8:30 AM ET
  • Industrial Production 9:15 AM ET

Wednesday

  • MBA Mortgage Applications 7:00 AM ET
  • Retail Sales 8:30 AM ET
  • Business Inventories 10:00 AM ET
  • Housing Market Index 10:00 AM ET
  • Atlanta Fed Business Inflation Expectations 10:00 AM ET
  • EIA Petroleum Status Report 10:30 AM ET
  • FOMC Announcement 2:00 PM ET
  • Fed Chair Press Conference 2:30 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
  • EIA Natural Gas Report 10:30 AM ET
  • Kansas City Fed Manufacturing Index 11:00 AM ET
  • 5-Yr TIPS Announcement 11:00 AM ET
  • 20-Yr Bond Announcement 11:00 AM ET
  • Fed Balance Sheet 4:30 PM ET

Friday

  • Quadruple Witching
  • Current Account 8:30 AM ET
  • Leading Indicators 10:00 AM ET
  • Charles Evans Speaks 11:00 AM ET
  • Baker Hughes Rig Count 1:00 PM ET
 

 

Sources: Econoday, FRBSL

Post author: Charles Couch

Disclosures