#TeamVNFA is the proud recipient of a 2020 Excellence
in Education Award. Yes, you read that correctly.
Our 2019 Volunteer
Challenge project was the creation of a “Just Press Pause” room at Paxinosa
Elementary in Easton. We were able to transform a classroom into a safe, relaxing
space for teachers and staff to rest and recover from the stresses of life and
their important work helping children.
Due to the pandemic, the award ceremony was delayed
and then canceled. What a delight it is for us now to receive this beautiful award,
along with a certificate and letters of nomination. Our team is so proud to
have made such an impact on our community. Our sincerest thanks go out to
everyone who helped make this project a reality, including Volunteer Center of
the Lehigh Valley for helping align us with our now life-long friends at Paxinosa
and Communities in Schools.
WATCH
a video about our “Just Press Pause” project. LEARN MORE about the
annual Volunteer Challenge.
by William
Henderson, Vice President / Head of Investments
Last week, the three broader market indices posted positive returns with the growth clearly outperforming value as
investors moved to technology and communications related equities. The Dow
Jones Industrial Average returned just +0.02%, the S&P 500 Index +1.2%, and the NASDAQ +3.3%. All three indices are now well into positive returns territory
for the full year, with the Dow Jones Industrial Average at +1.4%, the S&P 500 Index showing +2.4% and the NASDAQ at a healthy +5.1%. While technology stocks showed strong gains for the week,
cyclical sectors like energy, financials and materials declined on the
week. Despite strong housing and jobless claims data released last week, the 10-year Treasury yield ended lower on the week
at 1.09%.
Goldman Sachs
noted “by the end of trading on Friday, January 22, 2021, the S&P 500 had
recovered +70% from its March 2020 low.” More importantly, they continued, “history suggests that there is more room to run in the market even after 2020’s strong rally. During past U.S. economic expansions, investors
have enjoyed positive one-year returns 87% of the time, and >10% drawdowns
only 4% of the time.”
Adding to history, we have a willing Fed providing liquidity and stability to the markets. It is important to remember the adage: “Don’t fight the Fed.” Further, Jay Powell and this Fed Team are as transparent as any group since the GFC. Every Fed Governor is repeating the “Lower for Longer” plan regarding interest rates and we believe them. Until the economy is safely in growth mode and the impacts of COVID-19 are waning, this Fed will keep the liquidity pump primed and give unlimited backstops to the market to assure stability.
The newly formed Biden Administration has been very clear with their intentions to combat COVID-19 with effective vaccine distribution thereby reversing the economic damage done by the pandemic. However, each U.S. state is going about the vaccination task with its own rules and processes with no real consistency of distribution. This is lending anxiety to consumers and the markets as the process of vaccinating most Americans is still uncertain and confusing. Our key themes remain the same: effective distribution of vaccines, a willing Fed, pent up consumer demand and a strengthening manufacturing sector. All together they equal a strong bullish sentiment for the year. Patience, as always, is a virtue.
THE NUMBERS Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.
MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.
US ECONOMY
CONSUMER HEALTH
NEUTRAL
Retail sales declined by 0.7% in December, the third consecutive month during which the metric was negative. Economic activity is expected to remain muted over the next few months, until a meaningful percentage of the population has been vaccinated.
CORPORATE EARNINGS
NEUTRAL
Dozens of significant companies are reporting Q4 earnings this week. According to FactSet, S&P 500 earnings are expected to decline roughly 7%, year-over-year.
EMPLOYMENT
NEGATIVE
The unemployment rate was stagnant in December at 6.7%. This is the first month since April in which the unemployment rate did not improve.
INFLATION
POSITIVE
The Fed plans to allow inflation to temporarily overshoot its 2% target such that the long-term average is 2%. Inflation has been tame since the Great Financial Crisis, less than 2%.
FISCAL POLICY
POSITIVE
President Biden unveiled a $1.9 trillion stimulus package last week. If the bill passes through Congress, the U.S. economy will have received a total of approximately $4 trillion in stimulus over the trailing twelve months.
MONETARY POLICY
VERY POSITIVE
The Federal Reserve supported asset markets with unprecedented speed and magnitude in response to COVID-19.
GLOBAL CONSIDERATIONS
GEOPOLITICAL RISKS
NEUTRAL
There are few, if any, looming geopolitical risks that could upset the economic recovery.
ECONOMIC RISKS
NEUTRAL
Although economic activity mostly remains below 2019’s levels, improvement has occurred across nearly every measure since the April 2020 nadir. With multiple vaccines in distribution, a second fiscal package in place, and interest rates low, 2021 is positioning to be a strong economic year.
The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.
Tune in Wednesday, 6 PM for “Your Financial Choices” show on WDIY 88.1FM: Planning for the Year Ahead. The prerecorded program will cover elements of Financial Planning.
