December 21, 2020

Weekly Market Commentary December 14th to December 18th 2020

Retail Sales in the U.S. were disappointing in November, falling by -1.1%. October results were also revised down by -0.4%. Auto sales declined in the month, but previously stable sales of electronics were also lower, as were clothing, department stores and restaurant sales. Non-store (online) retail managed a modest increase of just 0.2%. Without additional stimulus, personal consumption may be stalling out at year end.

The Federal Open Market Committee (FOMC) met this week and (as expected) left rates unchanged. Forecasts by Fed officials point to a Fed Funds Rate near zero out to 2023. The FOMC announced that they will continue to purchase bonds (at least $120 billion per month) and add to their already bloated balance sheet until economic conditions, specifically employment and inflation, show signs of improvement.

Weekly Jobless Claims increased the most in three months to 885k from 862k the prior week. Continuing Claims combined with Pandemic Unemployment Assistance statistics show that an incredibly large number of American workers (20.6 million) are currently receiving some form of unemployment assistance. Increased pandemic restrictions, particular the closure of restaurants to indoor dining in major U.S. cities such as New York, will continue to weigh on the labor force. A $900 billion incremental stimulus package negotiation has been ongoing In Washington throughout the week but did not cross the finish line.

U.S. equity market indices continued their advance further into record territory this week, followed by a modest pullback in the final trading session. The S&P 500 advanced by 1.3% to 3,709. The Nasdaq Composite was higher by 3.1%. The 10-Year U.S. Treasury yield closed the week higher by 5 basis points to 0.95%.

Key economic releases in the holiday-shortened trading week next week include New and Existing Home Sales, Durable Goods Orders, and Weekly Jobless Claims.