U.S. Markets
A tumultuous year ended on a positive note as stocks rose in December, spurred by the rollout of multiple COVID-19 vaccines and the signing of a new fiscal relief bill.
The Dow Jones Industrial Average, which lagged all year, picked up 3.27 percent. The Standard & Poor’s 500 Index gained 3.71 percent, and the Nasdaq Composite tacked on 5.65 percent.[1]
Vaccines Take Center Stage
Investors were buffeted by news of rising infections and new lockdowns even as they kept a close eye on the start of vaccine distribution in the U.K., which some observers referred to as “the beginning of the end” of the coronavirus pandemic.
Boost from the Stimulus Package
Much like November, stocks rallied when Congress made progress on the new fiscal stimulus bill but pulled back as talks seemed to stall. After some posturing, President Trump signed the new law, which helped stocks surge in the final week of trading.
All Eyes on the Election
As investors grappled with these headline issues, markets also saw several new and secondary equity offerings, including two high-profile technology initial public offerings (IPOs) during the month. This year, companies raised over $167 billion in IPOs, blowing past the record of $107.9 billion set in 1999.[2]
Sector Scorecard
The majority of industry sectors posted gains in December, including Communication Services (+2.35 percent), Consumer Discretionary (+2.18 percent), Consumer Staples (+0.10 percent), Energy (+3.97 percent), Financials (+4.45 percent), Health Care (+2.30 percent), Industrials (+0.12 percent), Materials (+1.58 percent), and Technology (+5.14 percent). The Real Estate (-1.04 percent) and Utilities (-1.69 percent) sectors lost ground.[3]
What Investors May Be Talking About in January
After the November election, markets rallied due to initial tallies that seemed to point to a potentially divided government, which historically has been a positive for the equity markets.[4]
However, Georgia’s two Senate seats remained undecided and were going to a special election this month.
Ultimately, this runoff will determine which party controls the Senate and may give insight into the future legislative agenda of the incoming Biden administration.
World Markets
International stocks enjoyed a strong month of performance, with the MSCI EAFE Index gaining 5.24 percent.[5]
Vaccine optimism and an exit agreement between the European Union and the U.K. helped power the markets.
Germany gained 3.22 percent while the United Kingdom picked up 3.10 percent. France lagged a bit, tacking on 0.60 percent.[6]
Pacific Rim markets also enjoyed a solid month. The Hang Seng Index rose 3.38 percent and the Nikkei tacked on 3.82 percent.[7]
Indicators
Gross Domestic Product: The final read on third quarter GDP was revised higher, from 33.1 percent to 33.4 percent.[8]
Employment: Nonfarm payrolls rose by a disappointing 245,000 in November. The unemployment rate ticked lower, falling from 6.9 percent to 6.7 percent. The labor-force participation rate was 61.5 percent, which is an improvement from April’s low but remains at a historically low level.[9]
Retail Sales: Retail sales fell 1.1 percent in November, showing a slowdown in consumer spending amid economic lockdowns and continued uncertainty. October’s retail sales number was revised downward, from an increase of 0.3 percent to a decline of 0.1 percent.[10]
Industrial Production: Rising for the seventh consecutive month, industrial output picked up 0.4 percent in November, powered by a 0.8 percent leap in manufacturing.[11]
Housing: Housing starts reached a nine-month high, rising 1.2 percent in November.[12]
Existing home sales declined 2.5 percent in November. It was the first decline in six months.[13]
New home sales slumped 11.0 percent compared to last month, but were 20.8 percent higher than in November 2019.[14]
Consumer Price Index: Prices of consumer goods and services rose by 0.2 percent in November, leaving the year-over-year inflation rate at 1.2 percent.[15]
Durable Goods Orders: Durable goods orders rose by 0.9 percent, marking the seventh consecutive month of gains.[16]
The Fed
In its last meeting of 2020, the Federal Open Market Committee (FOMC) detailed its plan to continue purchasing $120 billion in Treasury and mortgage-backed securities.[17]
Fed officials said that they will continue the program until they see substantial progress toward meeting its inflation and employment goals. Officials at the Fed have indicated that achieving such goals may not happen for years.[17]
| MARKET INDEX | Y-T-D CHG | DECEMBER 2020 |
| DJIA | 7.25% | 3.27% |
| NASDAQ | 43.64% | 5.65% |
| S&P 500 | 16.26% | 3.71% |
| BOND YIELD | Y-T-D | DECEMBER 2020 |
| 10 YR TREASURY | -1.00% | 0.92% |
Source: Yahoo Finance, December 31, 2020
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year Treasury real yield = projected return on investment, expressed as a percentage, on the U.S. government’s 10-year bond.
Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, member FINRA/SIPC. Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser.
Lighthouse Financial, LLC and Cambridge are not affiliated.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs, or expenses. Investors cannot invest directly in indices. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The MERVAL Index (MERcado de VALores, literally Stock Exchange) is the most important index of the Buenos Aires Stock Exchange. The MICEX 10 Index is an unweighted price index that tracks the ten most liquid Russian stocks listed on MICEX-RTS in Moscow. The BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). The Nifty 50 (NTFE 50) is a well-diversified 50-stock index accounting for 13 sectors of the Indian economy. It is used for a variety of purposes such as benchmarking fund portfolios, index-based derivatives and index funds. Established in January 1980, the All Ordinaries is the oldest index of shares in Australia. It is made up of the share prices for 500 of the largest companies listed on the Australian Securities Exchange. The MSCI World Index is a free-float weighted equity index that includes developed world markets and does not include emerging markets. The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. Nikkei 225 (Ticker: ^N225) is a stock market index for the Tokyo Stock Exchange (TSE). The Nikkei average is the most watched index of Asian stocks. The Hang Seng Index is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The Mexican Stock Exchange, commonly known as Mexican Bolsa, Mexbol, or BMV, is the only stock exchange in Mexico. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The DAX 30 is a Blue-Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The FTSEurofirst 300 Index comprises the 300 largest companies ranked by market capitalisation in the FTSE Developed Europe Index. The U.S. Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. 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Citations.
1. The Wall Street Journal, December 31, 2020
2. The Wall Street Journal, December 30, 2020
3. FactSet Research, December 31, 2020
4. HartfordFunds.com, October 2020. “The Election and Your Portfolio.”
5. MSCI.com, December 31, 2020
6. MSCI.com, December 31, 2020
7. MSCI.com, December 31, 2020
8. CNBC.com, December 22, 2020
9. CNBC.com, December 4, 2020
10. TheNewYorkTimes.com, December 16, 2020
11. FederalReserve.gov, December 15, 2020
12. CNBC.com, December 17, 2020
13. CNBC.com, December 22, 2020
14. Census.gov, December 23, 2020
15. BureauOfLaborStatistics.gov, December 10, 2020
16. AdvisorPerspectives.com, December 24, 2020
17. CNBC.com, December 11, 2020