Week Ending: December 18, 2020
U.S. stock prices advanced and most major indexes reached new highs as coronavirus vaccines were administered and the government closes in on a $900 Billion stimulus bill. Small and medium sized company stocks generally outperformed large company peers and growth stocks outperformed value. Sector performance was mixed as energy stocks rotated out of a leadership position and were down more than 4%. The information technology, consumer discretionary, and materials sectors outperformed while defensive sectors such as communication services, utilities, and consumer staples lagged. Developed foreign stocks in Europe and Asia narrowly outperformed U.S stocks, while Emerging Market stocks lagged developed foreign markets.
U.S. Treasury yields rose this past week (bond prices and yields move in opposite directions) as the Federal Reserve (Fed) voted to maintain monthly bond purchases of at least $120 billion and reaffirmed their commitment to keeping short term borrowing rates near zero through 2023. High yield (below investment grade) corporate bonds were the best performing asset class while long-term government bonds were down more than 1%. Investment grade corporate bonds are yielding approximately 1.8% and high yield (below
investment grade) corporate bonds are yielding more than 4.5%.
Economic data released during the week was worse than expected but largely overshadowed by the virus and prospects of a fiscal spending package. Weekly initial unemployment claims increased to 885,000 which is the highest level in three months and approximately 5.5 million Americans continue to claim ongoing unemployment benefits. Housing continues to be an area of strength as single-family starts rose for the seventh consecutive month to an annualized rate of 1.2 million, the highest since 2007. Several leaders in Europe had to quarantine themselves after French President Emmanuel Macron developed COVID-19 symptoms and lockdowns were tightened throughout parts of Germany and the UK.