Tuesday, December 29, 2020
Lessons learned from the Fed in 2020. The Federal Reserve (Fed) will remain in focus for markets in 2021.
- “Don’t fight the Fed” seems like obvious investor guidance in hindsight, but it didn’t in March 2020 and it shouldn’t be forgotten if the economy stumbles again.
- 2020 saw an important pivot in how the Fed thinks about inflation after it created an added buffer against raising rates too soon.
- For more on what the Fed did in 2020 and what it means for 2021, see today’s LPL Research blog.
Global stocks surge. Stocks around the world continue their bullish streak as the passing of financial stimulus and Brexit hurdles lift global sentiment.
- The S&P 500 Index opened higher after setting new all-time highs on Monday alongside the Dow and
- European stocks firmly higher in midday trading, led by the United Kingdom (UK).
- Asian markets surged on the heels of Monday’s technology route, with the Nikkei 225 gaining over 2.5%.
Week ahead. The economic calendar for the holiday-shortened week includes:
- Tuesday: S&P/Case-Schiller Home Price Index (Oct.)
- Wednesday: Wholesale Inventories (Nov.), Chicago Purchasing Managers’ Index (PMI, Dec.), and Pending Home Sales (Nov.)
- Thursday: Initial Unemployment Claims
January 1, 2021: LPL Financial and the stock and bond markets will be closed January 1.
Technical update. Mega-cap growth stocks pushed benchmark indexes to solid gains on Monday. The S&P 500 gained 0.9%; however the Russell 2000 finished the day lower after trading to a record high earlier in the day. Despite headline gains, advancers just barely outnumbered decliners on the NYSE.
COVID-19 news. The 7-day average of new daily cases in the United States marked its fourth straight decline yesterday, although hospitalizations surged above their 7-day average (source: COVID Tracking Project).
- The UK is still dealing with a surge of new cases and hospitalizations as the nation continues to battle the more contagious strain of the virus.
- Holiday-related skew may continue to impact the reliability of data in the near term.
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