Weekly Investment Update

US stocks, as measured by the S&P 500 index, rose nearly two percent last week[1] as investors remained optimistic regarding the prospects for an end of the COVID-19 pandemic in 2021 and a sustained economic recovery. This week will have no shortage of potentially market-moving events:

Event Expectations Importance for Investors Potential Surprises
Federal Reserve Open Markets Committee

The FOMC will hold their January meeting on Wednesday where they are largely expected to continue to communicate monetary support for the economy in the form of near-zero interest policy and a continuation of providing liquidity through asset purchases.

Two key pillars of the market recovery that began last March have been unprecedented levels of economic support from the Federal Reserve (monetary) and the US government (fiscal).

Investors will be closely monitoring the meeting for any sign of potential divergence from the previously-communicated supportive monetary policy stance. The expectation for an extended period of near-zero interest rates has significantly aided stock prices.

Corporate Earnings

Large US companies like Apple, Microsoft, Facebook, and Visa will report earnings this week, and it is expected that they will continue to confirm healthy levels of sales and earnings growth.

Technology, e-commerce, and communications companies have been relative winners during the pandemic as people switched to doing more at home. Low interest rates and durable earnings growth have led investors to pay above-average prices for many of these companies.

Any sign of potential slowing of earnings growth could create significant market volatility as investors reprice their expectations for future profitability.

Economic Releases

Q4 2020 US Gross Domestic Product will be released this week as well as the Conference Board’s index of Leading Economic Indicators. Both are expected to show continued recovery in economic growth following the pandemic-induced recession.

Like corporate earnings above, investors have been expecting a sustained economic recovery, so these reports will confirm whether that trend remains intact.

A slowing of economic growth, particularly for future growth implied by the Leading Economic Indicator index, may impact stock prices.

Key Economic Releases This Week

Day Report Period Consensus Est. Previous
Thursday, Jan. 28 US Gross Domestic Product (quarterly change) Q4 2020 4.2% 33.4%
Thursday, Jan. 28 Leading Economic Index (monthly change) December 0.3% 0.6%
Friday, Jan. 29 Personal Income (monthly change) December 0.1% -1.1%
Friday, Jan. 29 Personal Spending (monthly change) December -0.4% -0.4%
Friday, Jan. 29 PCE Core Deflator (yearly change) December 1.3% 1.4%

Source: Bloomberg

Asset Class Returns

Category Representative Index YTD 2021 Full Year 2020
Global Equity MSCI All-Country World 3.2% 16.3%
US Large Cap Equity  S&P 500  2.4% 18.4%
US Small Cap Equity  Russell 2000 9.8% 20.0%
Foreign Developed Equity MSCI EAFE 2.5% 7.8%
Emerging Market Equity MSCI Emerging Markets 7.9% 18.3%
US High Yield Fixed Income ICE BofAML High Yield Bond 0.4% 6.2%
US Fixed Income Bloomberg Barclays US Aggregate Bond -0.8% 7.5%
Cash Equivalents ICE BofAML 0-3 Mo Deposit 0.0% 0.5%

Source: Morningstar as of January 22, 2021

Prices & Interest Rates

Representative Index Current Year-End 2020
S&P 500 3,841 3,749
Dow Jones Industrial Avg. 30,997 30,497
NASDAQ 13,543 12,886
Crude Oil (US WTI) $51.98 $48.52
Gold $1,856 $1,893
US Dollar 90.24 89.94
2 Year Treasury 0.13% 0.13%
10 Year Treasury 1.10% 0.93%
30 Year Treasury 1.85% 1.65%

Source: Bloomberg, US Treasury as of January 22, 2021

[1] Source: Morningstar

Past performance may not be representative of future results.  All investments are subject to loss.  Forecasts regarding the market or economy are subject to a wide range of possible outcomes.  The views presented in this market update may prove to be inaccurate for a variety of factors.  These views are as of the date listed above and are subject to change based on changes in fundamental economic or market-related data.  Please contact your Financial Advisor in order to complete an updated risk assessment to ensure that your investment allocation is appropriate.   

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