Conway’s QuickTake: Week of December 14, 2020
|Here’s What Happened Last Week: |
U.S. Equities and Economic Data/News
Major benchmarks reached new highs earlier in the week but retraced in the back half contributing to mixed results. The S&P 500 Index was off nearly 1% over the period. Within the S&P 500 Index, the energy sector outperformed as oil prices (WTI) rose to near $50 per barrel for the first time since the start of the pandemic. The IT sector lagged as investor’s attention turned to the economy reopening. Small caps (as measured by the Russell 2000 Index) were positive for the week. This marked the fifth consecutive week that small caps outpaced large caps, reversing the trend from earlier in the year. Two notable IPOs, AirBnB and DoorDash, came to market and subsequently rose meaningfully above their initial listing price. 2020 is on pace to be the highest volume and busiest IPO year since 2014.
The fight against the coronavirus pandemic reached a pivotal milestone as the Pfizer vaccine was approved, and in some cases distributed, in several developed countries. The U.S. FDA approval came late in the week and Pfizer is rapidly preparing shipments to begin the first phase of domestic vaccinations as early as today. While an end might be in sight, cases within the U.S. continued to surge following the Thanksgiving holiday. The U.S. crossed the bleak milestone of more than 3,000 deaths in a single day. California recently issued new stay-at-home orders and NYC has again shut down indoor dining. Legislators continue to debate a relief bill and grapple with a budget-induced shutdown. Core divisions remain around liability shields for businesses (Republican ask) and assistance for state and local governments (Democratic ask). The latest wave of infections has translated to increased weekly jobless claims of more than 850,000, the highest level in three months. Continuing jobless claims also rose from 5.53 million to 5.76 million breaking a streak of declines.
|International Equities and Economic Data/News|
European stocks fell in USD terms last week amidst rising coronavirus cases and renewed Brexit uncertainty. Japanese stocks were mixed and the yen was little changed relative to the USD. Overall, the developed international MSCI EAFE Index fell 0.5%. Chinese equities struggled due to renewed tensions with the U.S., although local economic data continued to improve. The broad MSCI Emerging Markets Index fared better, rising 0.5% over the period.
Rising concerns of a no-deal Brexit spooked markets late in the week. Talks between British PM, Boris Johnson, and European Commission president have so far failed to break the deadlock. COVID-19 cases continued to surge across much of Europe. France announced it will continue its lockdown beyond mid-December and Germany is also contemplating tightening restrictions. The U.K. was the first developed nation to start mass vaccinations, which began last Tuesday starting with medical care works and the elderly. The EU passed a historic budget incorporating a 750-billion-euro coronavirus recovery fund for 2021 to 2027. The Fund will start making distributions to member states in the second half of next year. Japanese PM, Yoshihide Suga announced that the government was prepping a third stimulus package totaling more than $706 billion to support the struggling economy. The aid package will be used to support a variety of areas including disaster management, economic stimulus, and longer-term initiatives such as reducing carbon emissions and encouraging digital innovation.
The yield on the 10-year dropped to the lower bound range on the week, opening at 0.972% to start and touching 0.871% on Friday. On the supply front, last Thursday’s 30-year treasury auction was met with strong demand. The spread between 5 year and 30-year bonds flatted slightly. Corporate spreads were wider last week. Supply is starting to dwindle as we approach year-end. Munis underperformed Treasuries last week. That said, the muni market continues to be supported by light supply and continued inflows. NYC bonds was downgraded by Fitch from AA to AA- due to implications of the pandemic.
Tuesday, December 15, 2020
•US Industrial Production
Wednesday, December 16, 2020
•Euro area Manufacturing PMI
•Euro area Services PMI
Thursday, December 17, 2020
•FOMC Rate Decision
•US Jobless Claims
•Philly Fed Survey
Friday, December 18, 2020
•Germany Ifo Business Survey
Sources: The WSJ, T. Rowe Price Global Markets Weekly Update, Goldman Sachs Weekly Market Monitor
Data in this report is obtained from sources which we believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. It is provided for your information and guidance and is not intended as specific advice and doesn’t not constitute an offer to sell securities. Consult your financial professional before making any investment decision. Past performance is no guarantee of future results. Diversification/asset allocation does not ensure a profit or guarantee against a loss. The Wilshire 5000 Total Market Index measures the performance of all U.S.-headquartered equity securities with readily available price data. The Standard & Poor’s 500 Index (S&P 500) is an unmanaged group of securities considered to be representative of the stock market. The Russell 2000 Index is a market-cap weighted index comprised of the smallest 2,000 companies within the Russell 3000 Index, a larger market-cap index made up of the largest 3,000 publicly traded companies in the U.S., nearly 98% of the investable U.S. stock market. The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI Europe Index captures large- and mid-cap representation across 15 Developed Markets countries in Europe, covering approximately 85% of the free float-adjusted market capitalization across the European Developed Markets equity universe. The MSCI Emerging Markets (EM) Index captures large- and mid-cap representation across 26 Emerging Markets countries, covering approximately 85% of the free float-adjusted market capitalization in each country. The MSCI Japan Index captures large- and mid-cap representation of the Japanese market, covering approximately 85% of the free float-adjusted market capitalization in Japan. The Bloomberg Barclays U.S. Aggregate Bond Index is a market capitalization-weighted index comprising Treasury securities, Government agency bonds, mortgage backed bonds, corporate bonds, and some foreign bonds traded in the U.S. The Bloomberg Barclays Global Aggregate Ex U.S. Index measures the performance of global investment grade fixed-rate debt markets that excludes USD-denominated securities. The Bloomberg Barclays Municipal Bond Index covers the U.S. dollar-denominated long-term tax-exempt bond market. Created by the Chicago Board Options Exchange (CBOE), the Volatility Index, or VIX, is a real-time market index that represents the market’s expectation of 30-day forward-looking volatility. Data in this newsletter is obtained from sources which we, and our suppliers believe to be reliable, but we do not warrant or guarantee the timelines or accuracy of this information. Consult your financial professional before making any investment decision. Past performance is no guarantee of future results. Diversification/asset allocation does not ensure a profit or guarantee against a loss.