Author: Ryan Frydenlund

Ryan Frydenlund

Financial News and Portfolio Management Discussion through January 23rd

US stocks climbed on strong corporate earnings. The S&P 500 rose 1.9% and the Dow was up 0.6% for the week both hitting new record highs.  Abroad, the FTSE All World Ex US gained 1.4% for the week.  The yield on the 10-year Treasury was flat for the week ending at 1.10%.

China posted GDP growth of 6.5% in the fourth quarter.  For the year the economy grew 2.3% despite the pandemic.  It was the only major world economy to see growth in 2020.

Initial jobless claims eased slightly to 900,000 for the past week.

Business activity in the US picked up pace to start 2021, while Europe showed an increasing risk of a second recession.

To date 88% of companies that have reported earnings have beaten earnings estimates.

Financial News and Portfolio Management Discussion through January 16th

US stocks fell over the week on disappointing economic news, a continuing surge in the coronavirus deaths and hospitalizations and amidst President Trump’s second impeachment. The S&P 500 dropped 1.5% and the Dow fell 0.6% for the week.  Small caps held up well however with eh Russell 200 up 1.5%.  Abroad, the FTSE All World Ex US was down 1.3% for the week.  The yield on the 10-year Treasury eased over the week to finish at 1.10% down from 1.13%.

US Inflation picked up modestly in December rising 0.4% and was up 1.4% over 2020.

President elect Joe Biden proposed a $1.9 trillion coronavirus relief package.

New jobless claims showed 965,000 people applied for jobless benefits, more than economists had expected and the most since March.

December retail sales fell 0.7%, more than expected.

Consumer confidence fell in December.

JP Morgan, Citigroup, and Wells Fargo all posted better than expected earnings.

Earnings for S&P 500 companies are expected to decline 6.8% for the 4th quarter.  The expected earnings decline at the start of the 4th quarter was -12.7%.

December Market Commentary

Market Commentary

US stocks ended a roller coaster year at a new record high.  After plummeting in late February and March as a result of the coronavirus and the resulting business shutdowns, the market rallied over the remainder of the year driven by Fed and US government stimulus, business reopenings, better than expected corporate earnings, and finally a variety of highly effective vaccines for COVID-19.  Both the vaccine and the second pandemic relief bill were the main drivers of performance in December.  The $900 billion relief bill provides stimulus checks for individuals, additional funds for the paycheck protection program, and funding for vaccine distribution.  The Pfizer and Moderna vaccines received emergency approval and the vaccines began being administered during the month.  The approval was a significant step forward as hospitalizations and case numbers have continued to hit new highs.  Corporate earnings were surprisingly resilient after the shutdowns in the first and second quarter with much better than expected results over the second half of the year.  Economic news over the month showed the US still rebounding, but struggling under the weight of increasing COVID-19 cases.  The November jobs reports disappointed with 245,000 jobs added, less than half the gains of October, but the unemployment rate edged down to 6.7% from 6.9%.  New unemployment claims remain elevated.  Retail sales fell 1.1% and consumer confidence eased.  The housing market was a strength of the economy over the year with home prices reaching record highs and more mortgages were taken out than any year on record.

Foreign stocks climbed in December on a variety of positive developments.  The UK was the first western country to issue emergency approval of the Pfizer vaccine and begin distribution.  However, a new, much more contagious strain of the coronavirus was discovered in the country and prompted new lockdowns and travel restrictions.  After marathon negotiations, the European Union (EU) reached a spending deal for additional pandemic relief.  The European Central Bank (ECB) announced they would increase their bond buying program from $607 billion to $2.25 trillion and extended it until at least March 2022.  They also provided support for the banking system, boosting liquidity through several measures until June 2022.  The EU reached a trade agreement with the UK over its exit from the country bloc averting potential business chaos if the UK left the country bloc at the end of the year without a deal in place.  It puts an end to the Brexit saga that started four and a half years ago.  OPEC members and a group led by Russia agreed to increase oil output by 500,000 barrels a day starting in January as they believe the worst of the pandemic is over.  China’s economic activity continued to rebound in November.  Industrial output, investment, and consumer spending all picked up pace in November and manufacturing hitting its highest level in a decade.  Emerging markets outpaced developed markets over December, the fourth quarter, and the year.

Bonds posted gains to end the year that saw interest rates hit record lows and the Fed take unprecedented actions to help support the economy.  Information released at the conclusion of the Fed’s December meeting showed officials expect the Fed Funds rate to stay near zero through at least 2023.  The Fed has also been buying $80 billion in Treasurys and $40 billion in mortgage bonds a month and said that buying would continue “until substantial further progress has been made” toward broader employment and inflation goals.  The 10-year Treasury yield ended the year at 0.93%, up from 0.84% to start December, but down significantly from the 1.92% where it started the year.  Over the month and fourth quarter, credit and muni bonds were the top performing sectors, while over the year, credit bonds led the way.  Longer term bonds outpaced shorter term bonds over December, the quarter, and 2020 as a whole.

 

Index PerformanceDec.Q42020
US Stocks (Russell 3000)4.50%14.68%20.80%
Foreign Stocks (FTSE AW ex US)5.50%17.18%11.47%
US Bond Mkt. (BBgBarc Int. Gov/Cred)0.21%0.48%6.41%
Municipal Bonds (BBgBarc 1-10 Yr Muni)0.35%0.82%3.95%
Cash (ICE BofA ML 3-Mo T-Bill)0.01%0.03%0.66%

There is no guarantee that any investment strategy, including those described here, will be successful. Any investment or investment strategy can lose money. Past performance does not guarantee or predict future results. You should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Raffa Wealth Management, LLC. This information was gathered from reliable sources but we cannot guarantee accuracy. Indexes do not reflect the fees associated with actual investments and such fees would reduce the performance illustrated.  Source: Morningstar, Inc.

A Year in Review

2020 was a year investors will not soon forget. A pandemic, a recession, the end of a more than decade-long bull market (and the beginning of another bull market), all-time highs for US stock indices, lockdowns & working remotely, a tense U.S. presidential election cycle, unemployment spiking more than 10 percentage points in a matter of months—the list could go on for some time. And after all of it, an above average calendar year return for U.S. stocks.

A Year in ReviewRead more

Financial News and Portfolio Management Discussion through January 9th

US stocks ended the week at a new record high on optimism over vaccines for COVID-19 and the potential for additional stimulus due to Democrats controlling congress and weaker job numbers.  The S&P 500 gained 1.8% and the Dow rose 1.6% for the week.  Abroad, the FTSE All World Ex US was up 1.9% for the week.  The yield on the 10-year Treasury surged over the week to reach its highest level since March.  It ended the week at 1.13% up from 0.93%.

The December jobs reports showed that COVID-19 is weighing on the job market as the US lost 140,000 jobs in December.  The unemployment rate held steady at 6.7%.

Factories in the US, Asia, and Europe increased their output in December pointing to a strong manufacturing sector.  US manufacturing activity hit its highest level in two years.

US auto sales ended the year on a strong note.

Saudi Arabia announced it would cut oil production by 1 million barrels a month starting next month as it’s grown concerned over a resurgent coronavirus.

Weekly jobless claims edged down slightly to 787,000 over the past week.