Tuesday, January 5, 2021
10 Lessons LPL Research Learned in 2020
LPL Research reviews its top 10 takeaways from 2020, the year-end Santa Claus Rally, and what the markets are saying about the Georgia runoffs in this week’s Market Signals podcast.
Stocks open lower after Monday’s weakness
The S&P 500 Index opened slightly lower this morning after coming under pressure Monday and suffering its worst decline to start a year since 2016.
- European stocks also are lower in midday trading.
- Asian markets closed higher with the Nikkei the lone major market decliner.
Georgia run-off elections are today
Georgia voters will be choosing two senators in Senate run-off races today.
- Republicans are favored to win at least one of the two contests, which would be enough to maintain control of the Senate, but the races have tightened.
- It might take several days for the votes to be counted, especially if it’s a close race.
Markets are watching Georgia
- There may be a modest relief rally in the markets if Republicans maintain control of the Senate, which would reestablish the status quo of divided government.
- A Democratic victory in both races may be a catalyst for a small selloff on expectations of higher corporate taxes and potentially a tighter regulatory environment. Increased stimulus prospects may provide a partial offset.
- Even if Democrats win both Senate seats, majorities would be slim in both the House and Senate, giving moderate Democrats and Republicans considerable influence.
Wild year for bond markets
Similar to stocks, 2020 was the tale of two completely different return periods for bonds—the first ending on March 23 and the second covering the rest of the year.
- Credit-sensitive bond sectors bounced back strongly after March 23, narrowing the performance gap with US Treasuries by the end of the year.
- The most rate-sensitive bond sectors still tended to outperform over the year while providing increased diversification.
- Today’s LPL Research blog reviews the 2020 bond markets.
Technical update. The S&P 500 fell from an early intraday record Monday and closed down 1.5% at 3700. Decliners outnumbered advancers by 2.6:1 on the New York Stock Exchange. Markets are down modestly in early trading, and the S&P 500 has support at 3635, followed by 3550.
COVID-19 news. New daily COVID-19 cases have been on the rise again as the post-Christmas data begins to roll in. The seven-day moving average of new cases has once again climbed over the 200,000 mark (source: COVID Tracking Project).
- December was the deadliest month of the COVID-19 pandemic in the United States with nearly 78,000 deaths.
- United Kingdom will implement a national lockdown to prevent their National Health Services from being overrun by new cases.
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