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Weekly Commentary

ND&S Weekly Commentary 1.19.21 – Markets Pull Back Last Week

Markets pulled back last week despite U.S. President-Elect Joe Biden proposing a larger-than-expected relief package. The $1.9 trillion Covid-19 relief package was designed to garner bipartisan support but will likely require some adjustments as passage is far from assured which tempering enthusiasm.

The DJIA, S&P 500, and Nasdaq indices all closed lower on the week by 0.91%, 1.46%, and 1.54%, respectively. The lone bright spot for US equity markets was the Russell 2000, bucking the trend to close 1.51% higher. International equities finished the week mixed with developed international (MSCI EAFE) giving back 1.36% and emerging markets (MSCI EM) ticking higher by 0.36%. Interest rates settled lower last week providing a reprieve for bond investors. The 10 year U.S. Treasury closed at a yield of 1.11%, which is down from 1.13% the week prior. Gold finished lower last week to close at $1839/oz.

Economic news released last week came in mostly below consensus. The Consumer Price Index (CPI) increased 0.4% in December, matching expectations. Over the last 12 months, inflation has increased 1.4%, which is not yet a concern but worth keeping close eyes on given the current monetary and fiscal policies. Jobless claims last week were 965k, a big increase from the previous week but slightly better than estimates. The producer price index (PPI) measuring final demand increased 0.3% in December, missing estimates of 0.4%. Also disappointing economists and equity markets was the retail sales report released Friday. The report showed retail and food-services sales declining 0.7% in December, marking the second consecutive monthly decline driven by the uptick in confirmed Covid-19 cases and restrictions.

President-Elect Joe Biden will be sworn into office this week, hopefully bringing some calmness to Washington. However, the tough work will begin for his administration as focus will need to be on the vaccination rollout and continued fight against Covid-19.

“Life’s most persistent and urgent question is, ‘What are you doing for others?” – Martin Luther King Jr.

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