Stocks advanced this week, continuing to look through rising coronavirus case numbers and elevated unemployment claims. Major U.S. indices all touched record high levels driven by the continued Federal Reserve promise of accommodative monetary policy and a fresh coronavirus relief package proposal working its way through Congress.The first phase of vaccinations began across the U.S. this week. Additionally, the FDA approved emergency use of a second vaccine, developed by Moderna. Promising comments from Health and Human Services Secretary Alex Azar on the speed of the vaccine rollout provided hope for a quicker distribution schedule than originally thought possible, even as initial issues surrounding logistics and allergic reactions surfaced.
For the week, the S&P 500 Index closed up 1.3%, while the Dow Jones Industrial Average rose 0.4%. Year to date, the S&P has gained 14.8% and the Dow is up 5.8%. The weakening in weekly unemployment numbers was more dramatic than expected, as first-time unemployment claims rose sharply again to 885,000, the highest tally since the first week of September. Continuing claims fell to a total of 5.5 million; however, many labor economists cautioned that the drop in continuing cases is likely attributable to people rolling off unemployment due to the expiration of their benefit period.
Congressional leaders spent most of the week hammering through negotiations on another coronavirus relief bill, seeking to provide additional support to an economy struggling to continue its recovery. While it remains likely that the incoming Biden administration will request significant pandemic-related spending soon after inauguration, the smaller amount of relief sought during this lame-duck session would help with short-term needs such as extended unemployment benefits, small business assistance, and money for vaccine distribution. This new bill likely includes another round of direct payments to citizens, although smaller than the amount distributed in the spring.
U.S. retail sales fell 1.1% in November, a worse-than-expected result as businesses continue to adapt to a world where foot traffic in stores is down significantly. Businesses that have adapted to providing an enhanced online experience have fared better than those unable to swiftly pivot to digital. Housing continues to be a bright spot: new residential construction numbers nearly returned to pre-pandemic levels, propelled by consumer demand and ultra-low mortgage rates. We still expect a period of short-term volatility in markets to persist along with the uneven economic data. However, we believe that once the vaccine has been widely distributed (likely by the late spring or early summer), pent-up consumer demand will join ongoing governmental monetary and fiscal support in triggering strong growth for the second half of 2021.
As we continue to navigate through the pandemic, our commitment remains to be here for you each step of the way. As always, please contact us with any questions about the economy and your financial plan.
We are committed to providing timely and actionable communication to our clients. If you’re looking for more financial insights, check out our detailed quarterly investment commentary. You also might be interested in two other new articles on our blog that address practical matters. One post offers tips on leveraging health savings accounts to save for retirement, while another article covers the ins and outs of avoiding cyber scams. As always, please reach out with any questions. We are here for you!