The market remained hot last week despite concerns over political instability. Adding to the worries was a worse than expected December jobs report that showed the first loss in total jobs since April. Find all of this plus a preview of our Q1 Investment Themes presentation in this week’s @KonvergentWP Market Update Video.
Here are the top three things we’re covering this week’s blog:
The Market
The S&P was up 1.82% on the week but it took a roller coaster ride to get there. After opening slightly higher to begin Monday’s session, the market quickly fell over 2.5% and showed clear signs of weakness. However, it was not long before the infamous dip buyers came in and swiftly provided enough support for the market to close well off its lows. The bullish trend continued until Wednesday afternoon, when news broke that the U.S. Capitol was under lockdown. This heavily volatile event gave way for a brief panic sell as investors weighed concerns over rising political turbulence. Nonetheless, the market once again recovered and finished the week strong.
Economic Data
New claims decreased slightly last week to 787,000. Over the past three months, new claims have lacked the momentum to drop beneath this level. With a warmer season approaching and the COVID vaccine on the horizon, economists hope this reading will soon begin to recover at a faster rate. Pandemic unemployment claims were nearly cut in half last week, dropping to 161,000. In total, there were 948,000 combined new claims for unemployment last week. While this is certainly a step in the right direction, claims remain well above pre-pandemic levels.
Continuing claims decreased last week to 5.072 million. This drop represented the fifteenth week of falling claims in the past sixteen weeks.
Total Claims for Unemployment from all programs decreased last week to 19.17 million. This was a drop of over 400,000, led by a nearly 300,000 decline in pandemic emergency unemployment claims.
On Friday, the Department of Labor reported the December Jobs Report. The report came in worse than expected with total jobs falling by 140,000. This reading was well below the consensus estimate of 50,000 and represented the first-time jobs decreased since April[1]. While this drop in jobs is concerning, the outcome has been a larger push for economic stimulus to help those most in need.
The unemployment rate held steady at 6.7%, slightly better than the 6.8% estimated[2]. After a rapid V-shaped recovery over the summer, it appears the employment growth is beginning to slow.
Another data point that has showed signs of concern is the labor participation rate, which remained locked at 61.5% in December. This level is still well below the pre-pandemic highs and raises concerns over the permanent loss of workers.
Quarterly Themes Presentation
With one of the wildest years in recent history in the books, speculation has come from all sides over what the market will do in 2021. Some fear the market is on the cusp of bursting a historic bubble, while others suggest the bull run is just getting started. No matter what ends up happening in the market, it is critical to have an investment strategy that is personalized to your own values and goals.
Just in the past week we have witnessed first-hand how external events can have a drastic impact on the market. Within minutes of rioters entering the Capitol building, the S&P fell nearly 1% from its previous high. Panic selling hit the market and many investors began to fear what would happen if the scene in Washington D.C. worsened. Eventually, the tension began to ease, and the markets quickly recovered. However, its events like these that demonstrate to us how important it is to have a data driven investment approach.
Here at Konvergent, we are constantly evolving our investment strategy to best serve our clients. Later this week, we will be releasing our Q1 Quarterly Themes presentation covering the following topics:
- A review of a volatile and surprising 2020 that included a pandemic, the sharpest drop in the market and GDP in history, followed by the sharpest recovery in market history but mixed results in the economy.
- Our outlook on where we see things headed in Q1 of 2021. We will take you through the data we are looking at and new research we are using to help guide us and to introduce you to the Quads!
- Finally, we will discuss the Death of the traditional 60/40 Portfolio and what that might mean over the long term for how you should be thinking about allocating your money.
More info on this is will be released soon, our goal is to get this video released by next week.
Articles of Interest
Georgia Runoff Implications – With the results of the Georgia runoff election officially certified, speculation has begun around what economic policy will be targeted first. While additional stimulus seems very likely, the future for Cannabis, Big Tech, and many other industries is in the hands of Congress. Check out this article for additional insight on what could happen in the stock market during a full blue wave.
UK COVID Turmoil – Even as COVID vaccinations have begun across the globe, many countries are facing increasingly worsening virus numbers. Check out this article for the latest update on the struggles facing the UK as they struggle to keep the virus as bay.
Stock Market Hysteria – Comparisons of the current market conditions to the early 2000s Dot Com bubble have been drawn ever since the beginning of the historic V-shaped recovery. One of the leading factors in this renowned bull market has run has been surge in amateur retail investors. Check out this article that goes into depth on one case of insane stock performance caused by a harmless tweet.
Social Media Post of the Week
Check out this inspirational Ted Talk from a rockstar stay at home dad!
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Bottom Line
Even as economic data and political tension continues to worsen, the market has made steady gains on speculation that the first half of 2021 will present more opportunities for recovery as well as additional stimulus. With easy data comparisons in Q1 and a light at the end of the tunnel for the COVID crisis, the market has numerous catalysts to rise even further in the next few months.
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 info@konvergentwealth.com or calling us at 253-236-7000.
[1]https://www.cnbc.com/2021/01/08/jobs-report-december-2020.html
[2] https://www.cnbc.com/2021/01/08/jobs-report-december-2020.html