Archive for ND&S Updates

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

January 19, 2021 

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.

ND&S Weekly Commentary 1.11.21- Markets Kick Off New Year in the Green

January 11, 2021 

Markets advanced last week as investors looked past political turmoil and focused on expectations of more stimulus out of Washington D.C.. Democratic victories in Georgia raised the likelihood of increased government spending to support a pandemic-weakened economy.

For the week, the DJIA advanced 1.61% while the S&P 500 gained 1.83%. The tech-heavy Nasdaq jumped 2.43%. Developed international markets also moved higher. For the week, the MSCI EAFE index gained 3.16% while emerging market equities (MSCI EM) finished higher by 4.83%. Small company stocks, represented by the Russell 2000, finished ahead by 5.91% for the week. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week lower as the index lost 0.94%. As a result, the 10 YR US Treasury closed at a yield of 1.13% (up ~20 bps from the previous week’s closing yield of ~0.93%). Gold prices closed at $1,834.10/oz – down 3.1% on the week. Oil prices jumped $3.72 (or 7.7%) last week as Saudi Arabia decided to cut oil production even as inventories were falling.

Economic news released last week was mixed. On Tuesday, the Institute of Supply Management (ISM) reported that December’s Purchasing Managers’ Index (PMI) advanced to 60.7% versus expectations for a level of 56.7%. On Wednesday, the U.S. Commerce Department reported that new orders for manufactured goods advanced 1.0% in November – beating an expected increase of 0.7%. On Thursday, the ISM reported that the Non-Manufacturing Index (NMI) advanced to 57.2%, outpacing expectations for a 54.5% reading. On Friday, the Department of Labor reported that the U.S. economy lost 140,000 jobs in December, a big miss against expectations for an increase of 50,000 jobs. Despite the decline in jobs, unemployment remained at 6.7% (better than estimates of 6.8%). The employment report was a stark reminder that the COVID-19 pandemic continues to impact economies and workers around the world.

Markets and accompanying valuations have advanced quite a bit over the past twelve months and we see signs that volatility will likely increase. We suggest investors stay close to their long-term target asset allocations with a slight defensive bias. Stay Safe!

“Your attitude, not your aptitude, will determine your altitude.” – Zig Ziglar

ND&S Weekly Commentary (1/4/21) – Markets End Year on High Note

January 4, 2021 

U.S. equities closed the last week of 2020 at or close to record all-time highs. For the week, the S&P 500, DJIA and NASDAQ were up 1.45%, 1.35% and 0.66%, respectively. International markets also finished on a high note with the MSCI EAFE adding 1.44% and emerging markets (MSCI EM) jumping 3.16%. The lone detractor were U.S. small cap equities (Russell 2000), which saw some profit taking to finish lower by 1.41%.

It was a slow week for news and economic reports with pending home sales declining 2.6% m/m. That will change in the first week of the year as there is a run-off election set for Tuesday in Georgia that will determine the direction of power in Congress. Market consensus is for Republicans to pick up at least one seat in the Senate giving them a majority. Markets do best under split control in Washington as it will usually foster an environment of bipartisanship. Markets would likely react negatively to a Democratic sweep … like any decline, it will ultimately be temporary. This week, look for reports on mfg. and non-mfg. PMIs with the big economic release being the U.S. Jobs Report for December. Expectations are modest with only 68,000 jobs being added and the unemployment rate increasing slightly to 6.8%. This would be a significant cooling from the 245,000 jobs added in November.

Interest rates were little changed last week as the 10 year U.S. Treasury note finished at 0.93%, down slightly from 0.94% the prior week. What a difference a year makes … many 2020 year-end estimates at the beginning of the year were for the 10yr U.S. Treasury to finish above 3.00%. Nobody saw the 360° turn in monetary policy that was required by the outbreak of Covid-19. The Federal Reserve reaffirmed its commitment to maintaining low rates for the foreseeable future.

Looking ahead to the New Year, the passage of a $900 billion stimulus package and the rollout of Covid-19 vaccines should help support consumer sentiment and bolster the economic recovery. Corporate earnings should also start to look better as the year unfolds.

Best wishes for a happy, healthy and peaceful New Year!

“You can change. And you can be an agent of change.” – Laura Dern