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