Market Update – December 26, 2020

Our best holiday wishes to you! As 2020 winds down, we look to the New Year with hope for an end to the coronavirus threat, greater personal interactions with others, and peace and prosperity for all.

Stocks rebounded from early losses to finish the abbreviated trading week mixed, with the Dow Jones Industrial Average marginally higher and the S&P 500 Index fractionally lower. Conflicting messages from economic data persisted this week; we anticipate this will continue until the vaccine is deployed in a more widespread fashion later in 2021. While the first phase of the vaccine rollout has already seen over 1.1 million shots administered in the U.S. – mostly to frontline healthcare workers – a long road remains to inoculate our population.

For the week, the S&P 500 Index closed down 0.2%, while the Dow Jones Industrial Average rose 0.1%. Year to date, the S&P has gained 14.6% while the Dow is up 5.8%. Unemployment data improved from last week: first-time unemployment claims fell more than expected to 803,000, while continuing claims continued their decline, to a total of 5.3 million. It’s staggering to think that nearly 70 million Americans have filed for unemployment benefits at some point during the pandemic – approximately 40% of the total labor force. While we have recovered a significant portion of those jobs, widespread vaccinations are likely necessary before we can approach pre-pandemic employment levels.

Other economic data released this week was not quite as positive as the movement in unemployment. The housing market took a breather last month, as both new and existing home sales fell in November. It’s unrealistic to expect housing to sustain its torrid 2020 second-half pace; indeed, the prospect for marginally higher long-term mortgage rates and lower home inventory levels could present headwinds for the housing sector. Consumer spending also dropped in November, flipping negative for the first time since April.

Two potential stumbling blocks to the recovery reached their crescendo this week: a new round of U.S. fiscal support and a Brexit trade agreement between the United Kingdom and the European Union. Although the House and Senate passed a compromise bill to fund the government and provide additional coronavirus relief, comments Tuesday evening from President Trump decrying certain provisions threatened to scuttle the bill. Markets seemed to shrug off the concerns, focusing on the near-inevitability of greater and greater fiscal spending – whether from the Trump administration, the Biden administration, or both. On the Brexit front, years of wrangling between the U.K. and the EU came down to haggling over fishing rights, before the two sides finally reached consensus Wednesday. Parliaments on both sides would still need to ratify the pact to make it official.

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 ways to reduce your taxes before year-end, check out our 2020 tax strategy reduction checklist. 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!

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