Todd’s Take on the Market

What a year it has been! It surely was “memorable”! There have been the “ups” and there have been the “downs”. It started with bushfires, but quickly the Coronavirus pandemic arrived and sent everything into a tailspin. If you only look at the numbers and take away all of the drama, the Dow is up 8.19% for the year, the S&P 500 is up 16% and the NASDAQ rose 43%.

It started as a continuation of last year’s bull market, but then quickly changed with COVID-19 and the markets took a hit—falling 10, 15, and then 20%. By the end of March, it looked like we would never recover, but then April came and stocks rebounded as no one expected, and it continued. Most if not all, did not believe in the rally, but we were soon to realize new all-time highs for the Dow, the NASDAQ and the S&P 500.

Congress passed an unprecedented fiscal stimulus and the Federal Reserve as well. There was going to be no one left behind. But, with all the aid, small business shuttered their doors, and many Americans could not pay their bills, but stocks soared to new highs.

Fast forward to today, and Walmart, Amazon and Target are the benefactors of the pandemic. But in the latest reading, we got gut-punching retail sales numbers for November, with downward revisions to October. We should see significant trimming of Q4 GDP tracking estimates, but still positive output for the quarter.

Today, if Congress was looking for any evidence that additional relief for Americans was needed, the November Retail Sales report should provide some ammunition. At the headline level, Retail Sales fell 1.1%, which was nearly four times the decline of consensus forecasts. Stripping out Autos and Gas, the numbers were just as bad. As if that wasn’t enough, October’s report was also revised significantly lower dropping from a gain of 0.3% at the headline level to a decline of 0.1%. Adding it all together, Retail Sales for November were 1.5% lower than what was originally reported in October’s report.

Housing has been the bright spot, but homebuilder Sentiment Slipped, but permits Soar to 14-Year-Highs on Renter-Nation Rebuild. People have nothing to do but fix up their homes and stay there.

On the jobs front, it has been an ugly picture since March. Another 885,000 people filed for first-time unemployment benefits last week—an increase from the week prior and higher than the 800,000 claims that economists were expecting.

Now the concerns are over a “mutant” COVID in Europe. Fears over the spread of this “mutant” more contagious strain of COVID in the UK have prompted travel restrictions into and out of the country. The UK news was out early Sunday and futures opened last night flat to slightly higher. A likely explanation may be that investors are taking profits into what will be an illiquid close to the year.

There is little in the way of economic data or earnings for the rest of the year, so we will be monitoring the COVID, fiscal and monetary stimulus and what ole’ Saint Nick has for us. I would still leave out the cookies and milk, I think he is immune.

Having said that, I wish you all a very merry Christmas and the happiest of a new year to come—I think we all need that.

Todd Day, MBA

Portfolio Manager
Horizon Financial Services, LLC

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