The market continued to gain ground despite a worsening COVID situation. Employment data came in much weaker than expected as new claims spiked higher for the second week in a row. Additional economic data furthered the concerns of a deteriorating economy. Find all of this plus more on the specific details of the newly passed stimulus package in this weeks @KonvergentWP Market Update Blog.
Here are the top three things we’re covering this week’s blog:
The S&P was up 1.29% on the week as a mix of stimulus negotiations and concerns over COVID shutdowns led to a rise in market volatility. After gapping higher to begin the week, the market sold off on Monday on rumors that New York City may once again facing a COVID lockdown. This was met with rumors out of Europe that a new strain of the virus is beginning the spread. However, this was quickly overlooked by the news that Congress was making genuine progress on a second stimulus package. Alongside this, the continued distribution of COVID vaccines have helped to build investor confidence of a strong Q1.
New claims increased last week to 885,000. This jump brings new claims to their highest level in over 15 weeks. Even more concerning is that the claims appear to be trending higher since the bottom in early November. With the darkest of winter still yet to come, this worrying situation has room to become even worse. Pandemic unemployment rose as well, bringing the total for new claims to 1.34 million.
Continuing claims came in at 5.508 million. This represented a slight decrease over the previous week and was the lone bright spot in an otherwise disappointing unemployment report.
Total Claims for Unemployment from all programs came in much higher at 20.646 million. The troubling increase of over 1.6 million was led by a spike in regular state and pandemic unemployment assistance claims. While the data itself was distressing, the reading put significant pressure on Congress to come to an agreement on a stimulus package.
Other economic data points released last week came in mixed. U.S. manufacturing production rose by 0.8% in the month of November, better than the 0.4% expected. However, the production remains -3.70% below the level seen last year at this time.
Similarly, industrial production increased slightly in November. Nonetheless, these readings are much worse than the headlines appear. Even with a sturdy bounce back in many industries, the initial drop was so catastrophic that the overall production is unlikely to return to pre-pandemic levels for multiple years.
Another area of distress was retail sales, which experienced the largest drop in seven months. This decline further illustrated the pain caused by surging COVID cases and growing lockdowns. Even with vaccine distribution beginning across the country, New York City is once again discussing a full shutdown. Unless the pandemic can be brought back under control, the retail sales data is likely to worsen even further.
One of the only areas of strength was in housing starts, which increased by 1.2% during November. Unlike many other industries, housing has truly experienced a V-shaped recovery since the initial drop in March.
After 5 months of waiting since the last stimulus bill expired, we finally got the news we have been waiting for over the weekend with Congress agreeing to a $900 billion deal. This deal includes direct checks of $600 to individuals with income below $75,000 in 2019 and extends unemployment benefits by an additional $300 per week for 11 weeks. The bill also adds new PPP funds for small businesses and extends rental eviction programs. This is so new that we are still sifting through the details and will cover this in more detail in the coming weeks.
Articles of Interest
Stimulus Finally Passed – After months of heated negotiations, Congress has finally come to an agreement on a second stimulus package. While much smaller than the previous bill, this relief will be instrumental in providing for those hit hardest by the pandemic. Check out this article for additional details on the specific assistance included in this round of stimulus.
Tesla’s Impact – Of all the companies making headlines during this unprecedented market year Tesla has been the most notable. Not only has founder Elon Musk grown to become the second most wealthy man in the entire world, but Tesla stock has also experienced a jaw dropping 700% year to date return. As a result, Tesla’s recent inclusion into the S&P 500 has many fearing additional volatility in the market. Check out this article for the realistic effect of Tesla’s volatile stock on the market index.
New COVID Strain – The discovery of a new strain of COVID in Europe has caused a surge of investor fear across the globe. However, its critical to research all the facts before making any major changes. Check out this article for a summary of what specialists know so far.
Social Media Post of the Week
We at Konvergent were able to get together as a team last Thursday and celebrate the holidays. We hope that you have been able to find some way to celebrate with your family as well!
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Non-Financial Story of the Week
I hope you all had a great weekend! This will be our last video of the year as we take some time off over the holidays. I am sure everyone will be happy to have 2020 come to a close and we look forward to continuing to deliver even more valuable content to you in 2021. We will still do our weekly blog post and will be back at it with the videos in January. We hope that you have found these helpful in getting our take on the current situation.
The market continued to look past current concerning economic data in favor of optimism for a bounce back in 2021 on stimulus and vaccine hopes, however, with that will come volatility like we are seeing early this week.
If you have any questions about any of the information in this week’s blog or what you should be doing right now with your personal and business planning, do not hesitate to reach out to us by sending an email to email@example.com or calling us at 253-236-7000.