Week Ending: December 11, 2020
U.S. stock prices declined after several major indexes reached new highs in the middle of the week. Small company stocks delivered gains and were the notable exception for the week as they outperformed both medium sized and large company peers. Style factors such as value and growth were mixed and largely dependent on size. Sector performance was mixed as energy led the market, followed by traditionally defensive sectors such as communication services, utilities, and consumer staples. Despite the relative performance of other defensive sectors, real estate was the worst performing sector and declined almost 3% for the week. Developed foreign stocks in Europe and Asia narrowly outperformed U.S stocks, while Emerging Market stocks outperformed developed foreign markets.
U.S. Treasury yields declined this past week (bond prices and yields move in opposite directions) as prospects for another round of fiscal stimulus have declined despite worsening virus and economic trends. Long-term government bonds were the best performing asset class while short-term investment grade corporate bonds lagged. Investment grade corporate bonds are yielding approximately 1.9% and high yield (below investment grade) corporate bonds are yielding more than 4.5%.
Economic data released during the week was mixed as consumer sentiment was better than expected but largely overshadowed by the virus and employment conditions. Weekly initial unemployment claims increased from 716,000 to 853,000 and approximately 5.8 million Americans continue to claim ongoing unemployment benefits. The increase in continuing claims ended a streak of consecutive weekly declines that dated back to September and is a concerning figure for the recovery. Several countries in Europe have either extended or are expected to extend lockdowns to combat the coronavirus while Japan announced a third round of fiscal stimulus that is estimated to be more than $700 billion to support the economy.