December 2020

by | Dec 9, 2020 | monthly

In this month’s recap: Stock prices powered higher and energized investors thanks to a month-long succession of positive news events.

Monthly Economic Update

Monthly Economic Update | Presented by Sterling Total Wealth Solutions | December 2020

U.S. Markets

Stock prices powered higher and emboldened investors in November thanks to a series of positive news events.

The Dow Jones Industrial Average, which has lagged much of the year, led the rally, jumping 11.84 percent. The Standard & Poor’s 500 Index tacked on 10.75 percent while the Nasdaq Composite rose 11.80 percent.1

All Eyes on the Election

Stocks opened the month strong, climbing throughout election week as bargain-hunting investors appeared to swoop in following a weak September and October.

While the immediate outcome of the presidential election was undecided, the projected results suggested a divided Congress, which investors interpreted as a productive environment for businesses.

Vaccine Booster

Stocks climbed higher on news of positive stage-three COVID-19 trial results that suggested a highly effective vaccine may be near at hand. Stocks that had been hurt by economic lockdowns surged on the news, while the stay-at-home stocks suffered steep declines. Bond yields and oil prices both moved higher on expectations of increased economic activity.

Positive momentum carried the Dow Jones Industrial Average, the S&P 500 index, and the Russell 2000 to record-high levels, with the Dow closing above the 30,000 mark.2

Companies Report Solid Quarter

While the U.S. election and progress on a coronavirus vaccine dominated the news cycle, companies in the S&P 500 reported solid earnings in the third quarter. As expected, the S&P 500 reported a year-over-year earnings of -6.3 percent. But when three hard-hit industries—energy, airlines, and hospitality—were excluded, earnings for S&P 500 companies grew by 4.3 percent.3

Sector Scorecard

All industry sectors moved higher in November, except Utilities, which fell 1.42 percent. The month saw strong gains in Communication Services (+7.34 percent), Consumer Discretionary (+5.49 percent), Consumer Staples (+3.95 percent), Energy (+34.54 percent), Financials (+17.50 percent), Health Care (+3.35 percent), Industrials (+14.74 percent), Materials (+12.50 percent), Real Estate (+5.96 percent), and Technology (+5.33 percent).4

What Investors May Be Talking About in December  

After such a powerful rally, investors may be asking themselves, “What’s next for stock prices?”

Traders are expected to watch the trajectory of new COVID-19 infections and how they may influence economic activity over the coming weeks and months.

While investors recognize that there will be manufacturing and distribution challenges with approved vaccines, they may also be paying attention to when a vaccine may be available to the general public.

World Markets

Riding a global wave of optimism surrounding multiple COVID-19 vaccine trials, the MSCI-EAFE Index jumped 16.86 percent in November.5

European markets were broadly higher, with sharp gains in France, Germany, Italy, and the United Kingdom. European markets appeared to look beyond the new lockdowns and obstacles that prevented the passage of a European Union recovery package.6

Markets in the Pacific Rim also had a solid month. Australia picked up 9.96 percent while Japan tacked on 15.04 percent.7

Indicators

Gross Domestic Product: The second reading of GDP growth was unchanged from its initial estimate of up 33.1 percent on an annualized basis.8

Employment: The number of new jobs increased by 638,000 in October, which sent the unemployment rate lower by one percentage point to 6.9 percent.9

Retail Sales: Retail sales rose 0.3 percent, making November the sixth-straight month of increased consumer spending.10

Industrial Production: Industrial output jumped 1.1 percent, although production remains below its pre-pandemic February level.11

Housing: Housing starts increased by 4.9 percent, led by a 6.4 percent rise in single-family home starts.12

Existing home sales rose 4.3 percent in October, touching a 14-year high. Median prices also hit a new record high.13

New home sales dipped 0.3 percent, as declines in the West and South regions weighed on overall results.14

Consumer Price Index: The prices of consumer goods remained unchanged. However, in the last 12 months, prices have increased by 1.2 percent.15

Durable Goods Orders:  Orders of long-lasting goods rose by 1.3 percent, which was above consensus estimates. The gain was driven by defense-related purchases.16

TIP OF THE MONTH

Some small business owners don’t have succession plans. If you haven’t created one, now is as good a time as any to start. This may not only enable continuity, but also address some legacy-strategy issues.

The Fed

On November 25, the Federal Open Market Committee released the minutes from its November meeting. The minutes showed that the Fed discussed plans to offer more definitive guidance about its purchases of Treasuries and mortgage-backed securities by linking the purchase program to economic conditions.17

This new guidance may be introduced as early as their next meeting on December 15. The minutes also reflected the Committee’s concern about the lack of a new fiscal stimulus. However, the Fed also acknowledged a better-than-expected economic improvement in American households.17

MARKET INDEX

Y-T-D CHANGE

November 2020

DJIA

3.86%

11.85%

NASDAQ

35.96%

11.80%

S&P 500

12.10%

10.75%

 

    

BOND YIELD

Y-T-D

November 2020

10 YR TREASURY

-1.08%

0.84%

Sources: Yahoo Finance, November 30, 2020

The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid.

QUOTE OF THE MONTH

“Remember that failure is an event, not a person.”

Zig Ziglar

THE MONTHLY RIDDLE

Daryl weighs 120 pounds more than his sister Julianne. Their combined weight is 180 pounds. How many pounds does Daryl weigh?

LAST MONTH’S RIDDLE: What is the significance of the following: The year is 1978, thirty-four minutes past noon on May 6th.

ANSWER: The time and month/date/year are 12:34, 5/6/78.

Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Sterling Total Wealth Solutions and Cambridge are not affiliated.

To learn more about Sterling Total Wealth Solutions, visit us on the web at www.sterlingtotalwealthsolutions.com

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The IBEX 35 is the benchmark stock market index of the Bolsa de Madrid, Spain’s principal stock exchange. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The DAX 30 is a Blue-Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The Bovespa Index is a gross total return index weighted by traded volume & is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange. The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. The FTSEurofirst 300 Index comprises the 300 largest companies ranked by market capitalisation in the FTSE Developed Europe Index. The Hang Seng Index is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The Mexican Stock Exchange, commonly known as Mexican Bolsa, Mexbol, or BMV, is the only stock exchange in Mexico. The Nifty 50 (NTFE 50) is a well-diversified 50-stock index accounting for 13 sectors of the Indian economy. It is used for a variety of purposes such as benchmarking fund portfolios, index-based derivatives and index funds. The BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). Nikkei 225 (Ticker: ^N225) is a stock market index for the Tokyo Stock Exchange (TSE). The Nikkei average is the most watched index of Asian stocks. The Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea Exchange. The FTSE TWSE Taiwan 50 Index consists of the largest 50 companies by full market value and is also the first narrow-based index published in Taiwan. The MICEX 10 Index is an unweighted price index that tracks the ten most liquid Russian stocks listed on MICEX-RTS in Moscow. The MSCI World Index is a free-float weighted equity index that includes developed world markets and does not include emerging markets. The All Ordinaries (XAO) is considered a total market barometer for the Australian stock market and contains the 500 largest ASX-listed companies by way of market capitalization. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

CITATIONS:

  1. The Wall Street Journal, November 30, 2020
  2. CNBC.com, November 23, 2020
  3. FactSet Research, November 20, 2020
  4. FactSet Research, November 30, 2020
  5. MSCI.com, November 30, 2020
  6. MSCI.com, November 30, 2020
  7. MSCI.com, November 30, 2020
  8. CNBC.com, November 25, 2020
  9. The Wall Street Journal, November 6, 2020
  10. The Wall Street Journal, November 17, 2020
  11. The Wall Street Journal, November 17, 2020
  12. MarketWatch.com, November 18, 2020
  13. The Wall Street Journal, November 19, 2020
  14. Reuters.com, November 25, 2020
  15. The Wall Street Journal, November 12, 2020
  16. MarketWatch.com, November 25, 2020
  17. The Wall Street Journal, November 25, 2020