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.
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US ECONOMY |
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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. |
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CORPORATE EARNINGS |
NEUTRAL |
Q4 earnings season kicked off last week as several major banks reported results. According to FactSet, S&P 500 earnings are expected to decline by roughly 7%, year-over-year. |
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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. |
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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%. |
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FISCAL POLICY |
POSITIVE |
President Biden unveiled a $1.9 trillion stimulus package last week. Should the bill pass through Congress, the U.S. economy will have received a total of approximately $4 trillion in stimulus over the trailing eleven months. |
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MONETARY POLICY |
VERY POSITIVE |
The Federal Reserve supported asset markets with unprecedented speed and magnitude in response to COVID-19. |
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GLOBAL CONSIDERATIONS |
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GEOPOLITICAL RISKS |
NEUTRAL |
There are few, if any, looming geopolitical risks that could upset the economic recovery. |
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ECONOMIC RISKS |
NEUTRAL |
Although economic activity mostly remains below 2019’s levels, improvement has occurred across nearly every measure since the April 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.