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U.S. equity markets posted minor gains last week with the exception of the tech-heavy Nasdaq which was up over 3%. Year-to-date, the Nasdaq is up over 42%.

If you read last week’s market commentary, the chart below from FactSet might look familiar. However, there is one major difference; it’s the addition of the last two columns on the right-hand side of the chart. In the chart, the green bars represent sales and the blue bars earnings. Actual figures are solid and estimated figures are shaded. By looking at the estimated bars on the far right, you can understand why the market has been so strong lately. it could also set up another Santa Claus Rally this year.

The Santa Claus Rally is comprised of the last five trading days of the year and the first two trading days of the new year. Some analysts definition varies slightly but for our purposes, there’s really no difference. One reason for the rally is that it takes place in the seasonally strong period of November – April that I’ve talked about several times. Other reasons for the rally are; positive outlooks as investors prepare to celebrate the holidays with family and friends, a peak in retail sales and institutional investors getting their books in order before holiday vacations begin.

A note to our clients: We have noticed improvement in international equities over the last couple of months. As such, we have added developed and emerging market exposure to many of our clients portfolios.

Wishing you and your family a Happy Holiday Season.

If you have any questions, please contact me.

The Markets and Economy

U.S. steelmakers idled about one-third of domestic production capacity this spring when customers began cancelling orders due to the pandemic. They now face challenges meeting customer demand as orders rebound more than steel producers anticipated. Executives admit it caught everyone in the industry off-guard. Closed plants are now reopening to help meet the increased demand.
Industrial production, a measure of factory, mining and utility activity rose for the seventh straight month in November. The 0.4% increase was fueled by the auto industry’s increased output.
Millions of U.S. renters face the prospect of eviction in January unless federal officials extend protections put in place during the Covid-19 pandemic. Between 2.5 and 5 million American households are at risk of eviction at the beginning of 2021. Millions more will be vulnerable in the coming months.
The number of U.S. workers seeking unemployment benefits increased to a three-month high last week. The Labor Department reported that unemployment claims rose by 885,000 for the week ending December 12.
According to the IRS for the year 2018, the top 3% of U.S. taxpayers reported earnings of at least $286,106 for adjusted gross income (AGI) but paid 53% of all federal income tax. The remaining 97% of taxpayers who reported income of less than $286,106 of AGI paid the remaining 47% of federal income tax.
The Federal Reserve added a bit more support to the economy last Wednesday after their two-day meeting. Fed officials released a policy statement that was unchanged from November’s meeting except for one difference. The new statement said the central bank would continue to buy treasuries and mortgage bonds until substantial further progress has been made toward its goal of full employment and 2% inflation.
Congress has passed four separate bills providing $2.8 trillion of pandemic relief for Americans. However, the last of the four bills was signed into law on April 24th or nearly eight months ago.
Consumers spent less in November as retail sales dropped a seasonally adjusted 1.1% over October. Restaurants, department stores and car dealerships reported sharp declines in November sales.
The Federal Reserve said that the largest U.S. banks remain strong enough to survive the coronavirus crisis, but warned that a prolonged economic downturn could pile on hundreds of billions of dollars in losses on defaulted loans.

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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 December 21st, 2020

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