Week Ending: December 25, 2020
U.S. stock prices were mixed as congress approved the $900 Billion stimulus bill that will offset some of the economic impact from a recent surge in coronavirus cases. Small and medium sized company stocks outperformed large company peers and growth stocks generally outperformed value. Sector performance was mixed as financials established a leadership position and were up nearly 2%. Information technology was the only other sector to finish the week in positive territory, whereas energy and defensive sectors such as communication services, utilities, and consumer staples lagged. Developed foreign stocks in Europe and Asia underperformed U.S stocks, while Emerging Market stocks lagged developed foreign markets.
U.S. Treasury yields declined this past week (bond prices and yields move in opposite directions) as demand for high quality bonds increased. High yield (below investment grade) corporate bonds were the worst performing asset class but still managed gains while long-term government bonds were the best performing segment. 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 generally worse than expected as U.S. household spending declined for the first time in seven months. Weekly initial unemployment claims decreased to 803,000 and approximately 5.3 million Americans continue to claim ongoing unemployment benefits. Existing home sales declined in November but that is largely due to supply constraints as demand remains elevated with a more than 25% increase in existing homes sold compared to last year. The EU and UK appear to finally be on the verge of a trade deal that will allow for a smoother transition for the UK to the leave European Union (Brexit). Several countries in Europe introduced more severe restrictions to limit contact and mobility during year-end celebrations.