Weekly Economic Update December 14, 2020
In this week’s recap: Rising number of COVID-19 cases and no progress on a stimulus bill lead to a bumpy week on Wall Street; U.K. anticipates “No-Deal” for Brexit.
THE WEEK ON WALL STREET
Stocks retreated last week on rising COVID-19 infections and slow progress on an economic relief bill.
The Dow Jones Industrial Average dipped 0.57%, while the Standard & Poor’s 500 dropped 0.96%. The Nasdaq Composite index fell 0.69% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, declined 0.05%.1,2,3
STIMULUS STALLS, STOCKS STUMBLE
The market grappled all week with worries over rising COVID-19 cases and the economic restrictions that followed. Nevertheless, there were moments of optimism— such as the starting of vaccinations in the U.K.— that drove markets to record highs.4
But gains could not be sustained as an agreement on a fiscal stimulus bill remained elusive and daily news regarding COVID-19 cases undermined investor sentiment.
Markets were also challenged by having to absorb a number of new and secondary stock offerings last week, including two high-profile technology IPOs. The Energy sector continued its strong run, while small and mid-cap stocks posted another week of positive performance.5
A "NO DEAL" BREXIT MORE LIKELY
The prospects of an agreement to manage Britain’s exit from the European Union by year end dimmed as the two parties failed to narrow their differences in a meeting held last week.6
Though primarily a European issue, a no-deal Brexit may hold consequences for U.S. businesses and investors. The failure to reach an agreement has the potential to disrupt an already fragile supply chain and cause issues in the financial markets. A supply chain disruption may weaken European economies (e.g., Germany) that are important to American companies. Another consequence may be a stronger U.S. dollar, which would make American exports more expensive and less competitive.
Little time remains in striking an agreement since the prevailing framework ends December 31, 2020.
Tip of the Week
Starting a small business? A written plan is handy for forecasting, budgeting and presenting your idea to potential investors. A written plan is far preferable to one you keep in your head.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: Industrial Production.
Wednesday: Retail Sales, Federal Open Market Committee (FOMC) Announcement.
Thursday: Housing Starts, Jobless Claims.
Friday: Index of Leading Economic Indicators.
Source: Econoday, December 11, 2020
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Thursday: General Mills (GIS).
Friday: Darden Restaurants (DRI).
Source: Zacks, December 11, 2020
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
Quote of the Week
“You’re born an original. Don’t die a copy.”
The Weekly Riddle
At a class reunion, everyone shakes hands exactly once with every person present. That results in a total of 28 handshakes. In total, how many people are at the reunion?
LAST WEEK’S RIDDLE: I have keys that will open no locks. I have a space and a lock that’s a key. You can enter but you can’t leave, and yet - you can escape. What am I?
ANSWER: A keyboard.
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the Nasdaq stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
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1. The Wall Street Journal, December 11, 2020
2. The Wall Street Journal, December 11, 2020
3. The Wall Street Journal, December 11, 2020
4. USAToday.com, December 8, 2020
5. CNBC.com, December 10, 2020
6. CNBC.com, December 9, 2020