by William Henderson, Vice President / Head of Investments
All three broader market indices showed negative returns for the week as portfolio rebalancing reallocating took place. The Dow Jones Industrial Average returned (-.91%), the S&P 500 Index (-1.48%) and the NASDAQ (1.54%). Market average for the full year 2021 remain in positive territory with year-to-date figures at +0.73 for the Dow Jones Industrial Average, +0.39% for the S&P 500 Index and +0.87% for the NASDAQ. Washington was relatively calm, and the markets are looking at a Martin Luther King Jr. holiday shortened week punctuated by the inauguration of President Biden and a peaceful transition of government.
The market will begin a laser-like focus on President Biden and his immediate actions as the new Commander in Chief. Already, President-elect Biden has announced his plans on a flurry of executive orders after his inauguration. Some will roll back Trump administration orders like immigration restrictions and others will be forward actions such as rejoining the Paris climate agreement, a mandate on mask wearing during travel and an extension on the pause on student loan payments. A clear focus on the distribution of the COVID-19 vaccine will remain and attention will be paid to the seemingly slower than expected rollout and distribution of vaccines that has thus far taken place. To be sure, mass vaccination, herd immunity and a roughly 75% vaccination rate is the catalyst the economy needs to continue its recovery.
President-elect Biden also announced the proposal of an additional $1.9 trillion stimulus package early in 2021. Even with a full Democrat-controlled Congress, another $1.9 trillion on top of December’s $900 billion stimulus may be a bit of a pipe dream for Biden and could have difficulty getting approved. All the fiscal and monetary stimulus aside, experts agree that the key to releasing the $20 trillion of cash in money market funds, savings accounts and commercial bank accounts into the economy remains solely focused on the distribution of the COVID-19 vaccine. Each positive indicator of a rebounding economy; whether it be record December e-commerce sales or strong foot traffic at U.S. ski resorts, runs smack into the pandemic and its needed vaccine.
The market will continue to take its cues from further government intervention in the form of fiscal stimulus, fourth-quarter and year-end corporate earnings releases and developments and improvements in the distribution of the COVID-19 vaccine. We believe the Biden administration will focus on the vaccine, an additional stimulus package and “green” initiatives that a loosely unified government will be able to get behind and move forward. Patience, diversification and a sound financial plan will be critical in 2021.