Monthly Market Insights | January 2021
A tumultuous year ended on a positive note as stocks rose in December, spurred by the rollout of multiple COVID-19 vaccines and the signing of a new fiscal relief bill.
The Dow Jones Industrial Average, which lagged all year, picked up 3.27 percent. The Standard & Poor’s 500 Index gained 3.71 percent, and the Nasdaq Composite tacked on 5.65 percent.1
Vaccines Take Center Stage
Investors were buffeted by news of rising infections and new lockdowns even as they kept a close eye on the start of vaccine distribution in the U.K., which some observers referred to as “the beginning of the end” of the coronavirus pandemic.
Boost from the Stimulus Package
Much like November, stocks rallied when Congress made progress on the new fiscal stimulus bill but pulled back as talks seemed to stall. After some posturing, President Trump signed the new law, which helped stocks surge in the final week of trading.
All Eyes on the Election
As investors grappled with these headline issues, markets also saw several new and secondary equity offerings, including two high-profile technology initial public offerings (IPOs) during the month. This year, companies raised over $167 billion in IPOs, blowing past the record of $107.9 billion set in 1999.2
The majority of industry sectors posted gains in December, including Communication Services (+2.35 percent), Consumer Discretionary (+2.18 percent), Consumer Staples (+0.10 percent), Energy (+3.97 percent), Financials (+4.45 percent), Health Care (+2.30 percent), Industrials (+0.12 percent), Materials (+1.58 percent), and Technology (+5.14 percent). The Real Estate (-1.04 percent) and Utilities (-1.69 percent) sectors lost ground.3
What Investors May Be Talking About in January
After the November election, markets rallied due to initial tallies that seemed to point to a potentially divided government, which historically has been a positive for the equity markets.4
However, Georgia’s two Senate seats remain undecided and will go to a special election this month.
Ultimately, this runoff will determine which party controls the Senate and may give insight into the future legislative agenda of the incoming Biden administration.
International stocks enjoyed a strong month of performance, with the MSCI EAFE Index gaining 5.24 percent.5
Vaccine optimism and an exit agreement between the European Union and the U.K. helped power the markets.
Germany gained 3.22 percent while the United Kingdom picked up 3.10 percent. France lagged a bit, tacking on 0.60 percent.6
Pacific Rim markets also enjoyed a solid month. The Hang Seng Index rose 3.38 percent and the Nikkei tacked on 3.82 percent.7
Gross Domestic Product (GDP)
The final read on third quarter GDP was revised higher, from 33.1 percent to 33.4 percent.8
Nonfarm payrolls rose by a disappointing 245,000 in November. The unemployment rate ticked lower, falling from 6.9 percent to 6.7 percent. The labor-force participation rate was 61.5 percent, which is an improvement from April’s low but remains at a historically low level.9
Retail sales fell 1.1 percent in November, showing a slowdown in consumer spending amid economic lockdowns and continued uncertainty. October’s retail sales number was revised downward, from an increase of 0.3 percent to a decline of 0.1 percent.10
Rising for the seventh consecutive month, industrial output picked up 0.4 percent in November, powered by a 0.8 percent leap in manufacturing.11
Housing starts reached a nine-month high, rising 1.2 percent in November.12
Existing home sales declined 2.5 percent in November. It was the first decline in six months.13
New home sales slumped 11.0 percent compared to last month, but were 20.8 percent higher than in November 2019.14
Consumer Price Index
Prices of consumer goods and services rose by 0.2 percent in November, leaving the year-over-year inflation rate at 1.2 percent.15
Durable Goods Orders
Durable goods orders rose by 0.9 percent, marking the seventh consecutive month of gains.16
In its last meeting of 2020, the Federal Open Market Committee (FOMC) detailed its plan to continue purchasing $120 billion in Treasury and mortgage-backed securities.17
Fed officials said that they will continue the program until they see substantial progress toward meeting its inflation and employment goals. Officials at the Fed have indicated that achieving such goals may not happen for years.17
By the Numbers: Eclipses
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, or state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
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.
Any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, timeframe, and risk tolerance.
The forecasts or forward-looking statements are based on assumptions, subject to revision without notice, and may not materialize.
The market indexes discussed are unmanaged and generally considered representative of their respective markets. 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. The S&P 500 Composite Index is an unmanaged group of securities considered to be representative of the stock market in general. The Nasdaq Composite is an index of the common stocks and similar securities listed on the Nasdaq stock market and considered a broad indicator of the performance of stocks of technology and growth companies. The Russell 1000 Index is an index that measures the performance of the highest-ranking 1,000 stocks in the Russell 3000 Index, which is comprised of 3,000 of the largest U.S. stocks. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark for the performance in major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
The Hang Seng Index is a benchmark index for the blue-chip stocks traded on the Hong Kong Stock Exchange. The KOSPI is an index of all stocks traded on the Korean Stock Exchange. The Nikkei 225 is a stock market index for the Tokyo Stock Exchange. The SENSEX is a stock market index of 30 companies listed on the Bombay Stock Exchange. The Jakarta Composite Index is an index of all stocks that are traded on the Indonesia Stock Exchange. The Bovespa Index tracks 50 stocks traded on the Sao Paulo Stock, Mercantile, & Futures Exchange. The IPC Index measures the companies listed on the Mexican Stock Exchange. The MERVAL tracks the performance of large companies based in Argentina. The ASX 200 Index is an index of stocks listed on the Australian Securities Exchange. The DAX is a market index consisting of the 30 German companies trading on the Frankfurt Stock Exchange. The CAC 40 is a benchmark for the 40 most significant companies on the French Stock Market Exchange. The Dow Jones Russia Index measures the performance of leading Russian Global Depositary Receipts (GDRs) that trade on the London Stock Exchange. The FTSE 100 Index is an index of the 100 companies with the highest market capitalization listed on the London Stock Exchange.
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1. The Wall Street Journal, December 31, 2020
2. The Wall Street Journal, December 30, 2020
3. FactSet Research, December 31, 2020
4. HartfordFunds.com, October 2020. “The Election and Your Portfolio.”
5. MSCI.com, December 31, 2020
6. MSCI.com, December 31, 2020
7. MSCI.com, December 31, 2020
8. CNBC.com, December 22, 2020
9. CNBC.com, December 4, 2020
10. TheNewYorkTimes.com, December 16, 2020
11. FederalReserve.gov, December 15, 2020
12. CNBC.com, December 17, 2020
13. CNBC.com, December 22, 2020
14. Census.gov, December 23, 2020
15. BureauOfLaborStatistics.gov, December 10, 2020
16. AdvisorPerspectives.com, December 24, 2020
17. CNBC.com, December 11, 2020
18. TimeandDate.com, 2020
19. TimeandDate.com, 2020
20. TimeandDate.com, 2020
21. TimeandDate.com, 2020
22. Softschools.com, October 1, 2020
23. Softschools.com, 2020
24. Softschools.com, 2020
25. NASA.gov, 2020
26. RollingStone.com, March 1, 2018