Market Week: November 30, 2020

The Markets (as of market close November 27, 2020)

Last Monday saw stocks advance following encouraging news in the development of yet another COVID-19 vaccine. The Russell 2000 climbed nearly 2.0%, followed by the Dow, the Global Dow, the S&P 500, and the Nasdaq. Treasury yields and crude oil prices surged, while the dollar was mixed. Among the market sectors, energy jumped higher, followed by industrials, financials, materials, and consumer discretionary. Health care, information technology, and real estate fell.

Cyclical stocks led the surge last Tuesday as the market pushed ahead for the second consecutive day. The Dow eclipsed 30,000 for the first time, and the S&P 500 hit a record. Among sectors, energy and financials soared, followed by materials, communication services, and industrials. Crude oil prices and Treasury yields climbed, while the dollar sank.

Cyclical and value stocks have been favored over mega-caps and tech stocks this month. Yet last Wednesday saw a reversal of that trend, but not enough to overcome a pre-holiday sell off. Of the indexes listed here, only the Nasdaq (0.5%) advanced. The Global Dow was essentially unchanged from the prior day, while the Dow (-0.6%), the Russell 2000 (-0.5%), and the S&P 500 (-0.2%) lost value. Crude oil prices continued to climb, while the dollar declined. Treasury yields were mixed.

Stocks continued to push higher the day after Thanksgiving. The Nasdaq added nearly 1.0%, followed by the Russell 2000, the Global Dow, the S&P 500, and the Dow. The yield on 10-year Treasuries fell, along with the dollar and crude oil prices. Among the major market sectors, health care, communication services, and technology gained, while energy and utilities fell.

Melissa MinterDecember 1, 2020

Overview

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The year began with the government stymied by a shutdown, and ended with articles of impeachment levied against the president. In between, both domestic and global economies showed signs of slowing, all while the trade war between the United States and China loomed throughout the year. Nevertheless, investors remained relatively bullish toward stocks, pushing several major indexes to record highs.

While domestic economic growth may have slowed in 2019 compared to 2018, it showed resilience and stamina. The third-quarter gross domestic product expanded at an annualized rate of 2.1% — moderately down from 2018's 3.0% rate, yet still strong enough to outpace global economic growth by a considerable margin. Consumer spending — which accounts for about two-thirds of the U.S. economy — surged, buoyed by a strong labor market, near-record unemployment, solid wage growth, and a burgeoning stock market. All told, the domestic economic expansion continued into its 11th straight year, the longest run in U.S. history.

Last year saw trade disputes between the United States and several of its trade partners reach an accord, but the trade war with China roared. The world's two largest economies engaged in a tit-for-tat skirmish, with each country volleying tariffs on their respective imports at the expense of the exporting nation. Coincidentally, a limited deal was announced just before the holiday shopping season, with the U.S. agreeing to forgo new tariffs and China assenting to allow more U.S. agricultural imports. Further negotiations are presumed, but the relationship between the economic giants remains tenuous at best.

Not only did the ongoing trade war affect global economies, but it also impacted domestic business investment, industrial production, and exports. Part of the justification cited by the Federal Reserve for lowering interest rates three times last year was weakness in business fixed investment and exports. As of November, new orders for durable goods were down 1.3% from the same period in 2018, and business (nonresidential) investment fell 2.3% in the third quarter.

The new year begins with a strong stock market and solid economic growth. The Secure Act, passed in late December, should change the retirement planning (and saving) landscape to some extent. However, the Treasury budget deficit for fiscal 2019 (October 2018-September 2019) exceeded $980 billion — 26% higher than the 2018 fiscal-year deficit. The trade war with China may cool with more mutual concessions, or accelerate, which would continue to dampen global economic growth. The new year will begin with the impeachment process and end with November's presidential election. What happens in between is anyone's guess. Will unemployment and inflation remain low? Will stocks continue to experience growth? Will oil and gas prices moderate or surge? Will the domestic economy continue to accelerate, or suffer a setback? Can the world economy recover, or will it continue to stagnate? If nothing else, 2020 looks to be an interesting year.

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Market Week: November 30, 2020

Overview

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