by William Henderson, Vice President / Head of Investments
For the week that ended December 11, 2020, U.S. stock markets pulled back a bit with each of the major indices turning in modest negative returns. For the week, The Dow returned -0.6%, the Standard & Poor’s 500 Index returned -1.0%, and the NASDAQ returned -0.7%. Last week’s pull back, however, was not significant enough to move any of the major indices into red territory for the full year. In fact, the major markets have given investors comfortable returns across the board. Year-to-date, the Dow has returned +5.3%, the S&P 500 +13.4%, and the NASDAQ Composite +38.0%.  

We continue to see positive notes impacting the economy. President Trump signed a stopgap spending bill on December 11, 2020 to avoid a government shutdown. Congress now has one week to agree on a full-year $1.4 trillion spending bill combined with COVID-19 relief. Lawmakers are squabbling over the details of another stimulus package with one group at $908 billion and another at $748 billion. The good news is that House Speaker Nancy Pelosi has agreed to speak with Treasury Secretary Steven Mnuchin so we could see an additional stimulus plan before year end. According to Gustave Perna, the army general who serves as Chief Operating Officer for Operation Warp Speed, the first shipments of Pfizer Inc.-BioNTech’s COVID-19 vaccines are scheduled to arrive this week in all 50 U.S. states. The widespread release of a vaccine for COVID-19 first by Pfizer, and quickly followed by Johnson & Johnson and Moderna by early spring 2021, is just what consumers and the markets are looking for to release pent up demand for spending. We have seen a faster-than-expected economic recovery and a concomitant rebound in risk assets like stocks; but yields on U.S. Treasury Bonds remain depressed. Don’t expect the Federal Reserve to raise rates anytime soon as they have clearly reflected a plan to keep rates lower for longer even in the face of higher inflation risks.  

What is important for investors is diversification. A thoughtfully diversified portfolio can weather different environments better than one that is stuck on a single style, geography or factor. A glance at returns for 2020 across the markets reinforces this notion as we have the Dow at a reasonable +5.3%, the NASDAQ posting a stellar +38.0%; and for fixed income, we have the Bloomberg Barclays US Treasury Total Return Index returning +8.0%. Diversification, when coupled with a sound financial plan, may be the last remaining free lunch for intelligent investors. There are just under three weeks left in 2020, a year that will be remembered long after the books are closed on the markets’ returns.

by William Henderson, Vice President / Head of Investments
For the week that ended December 4, 2020, stocks reached further into record territory with the Dow Jones Industrial Average closing comfortably above 30,000, at 30,218. For the week, The Dow returned +1.1%, the Standard & Poor’s 500 Index returned +1.7%, and the NASDAQ returned +2.1%. The weekly gains piled onto previous gains to put year-to-date figures well into the positive zone. Year-to-date, the Dow has returned +5.9%, the S&P 500 +14.5%, and the NASDAQ a staggering +38.9%. These numbers are all the more remarkable when factored in to what 2020 threw at the markets: a global pandemic, a huge double-digit recession and a complicated and costly U.S. Presidential Election. 

Last week, news of European Union (EU) regulators considering emergency authorization for Pfizer/BioNTech’s COVID-19 vaccine for wide-spread release sparked a rally early only to be stymied later in the week after Pfizer acknowledged supply chain problems. The general flip-flop has plagued the markets all year. We get good news that is quickly followed by bad news. We’ve seen this with 1) the vaccine but increasing COVID-19 case abound; 2) a stimulus package is discussed but not passed by congress; 3) a decided presidential election but a run-off in Georgia for two senate seats. It should not be news to readers of this report that we always talk about one clear constant that the markets are relying on for support – the Federal Reserve. The Fed has lowered rates to zero, announced monetary policy steps to sure up the bond markets and stated over and over that it will provide all needed stability and liquidity to assure the economic recovery.

Sure, the news and economic reports are as negative as they are positive, but the markets seem to be seeing past this noise and looking to 2021 when a vaccine for COVID-19 could be widely available and distributed around the world. Consumers, who have been storing up cash, will then be released to spend again and we could see a very strong economic rebound following 2020. The larger macroeconomic risks that exist today make it more important than ever for investors to keep their goals front and center and stick with their investment plans. It is much better to focus on long-term results over full market cycles.