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The approximate 3% loss that hit U.S. equity markets two weeks ago was reversed with last week’s performance. The Dow Jones Industrial Average was up almost 4% and the S&P 500 was up almost 5%. The tech-heavy Nasdaq was up 6%. January’s job report saw an increase of 49,000 new jobs. While the number wasn’t impressive, it did reverse December’s job losses.

There has been much written about our economic recovery being V-shaped. A sharp economic decline followed by a sharp rebound which resembles a “V”. Liz Ann Sonders, Senior Vice President and Chief Investment Strategist for Charles Schwab see our recovery resembling a K more than a V.

In Liz Ann’s chart below, the sharp economic decline is followed by the beginning of a rebound. However, it quickly diverges. Companies that flourished during the pandemic lockdown saw their revenues grow. But companies that were severely affected by the effects of Covid-19 shed workers and struggled to survive. Unfortunately, many did not.

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The Markets and Economy

The winter storms hitting much of the U.S. last week have resulted in natural gas prices spiking up 11%.
The U.S. economy in 2021 is expected to expand more rapidly than analysts had expected last summer. The 3.7% growth rate for this year is welcomed news. However, economists believe it will take several years for the economy to return to pre-pandemic levels.
GameStop, the company that saw its shares hit a high of $483 a few weeks ago, continued to see the price of its stock slide last week closing at $63.77 on Friday.
A continued bright spot in the U.S. economy is manufacturing. Two purchasing manager surveys on manufacturing activity recently released point to continued growth. With the economy appearing to slow during the last few months of 2020, analysts are feeling more bullish again.
Global trade is on the rebound. After falling for 10 consecutive months during the pandemic, the monetary value of goods shipped worldwide in November, 2020 exceeded its previous high achieved in December of 2019.
As noted at beginning of this week’s market commentary, January’s job numbers are in and just 49,000 new jobs were added by employers. The slight gain reverses the sharp decline in new jobs posted for December. Unfortunately, there are still 10 million jobs lost in 2020 that need to be recovered. The official unemployment rate fell to 6.3% from the previous months 6.7% figure.

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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.

Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

Securities offered through Triad Advisors, member FINRA/SIPC. Investment advice offered through Resources Investment Advisors, LLC, an SEC-registered investment adviser. Resources Investment Advisors. LLC and Vertical Financial Group are not affiliated with Triad Advisors.

David Kover on February 8th, 2021

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