Thursday, January 14, 2021
New Street View Video Sets Positive Tone
The stock market has started off 2021 surprisingly well, and LPL Research Chief Market Strategist Ryan Detrick says this bull market is alive and well. “Surprises to Start 2021,” the first Street View video of the New Year, is approved for clients.
Stocks open higher
Stocks opened higher, led by small caps, on reports suggesting President-elect Joe Biden will seek additional COVID-19 relief of around $2 trillion.
- European stocks are modestly higher in midday trading.
- Asian markets were stronger overnight, led by gains in Hong Kong.
Jobless claims higher than expected
The United States reported 965,000 claims for unemployment insurance, according to the Department of Labor, ahead of Bloomberg consensus forecasts calling for 789,000.
- Continuing claims were also higher than expected, with 5.27 million continuing to file for unemployment insurance versus Bloomberg estimates of 5 million.
- The jump in claims was ahead of the forecast range of all 44 economists surveyed and signals the continuing pressure on the labor market amid rising COVID-19 cases.
Biden to announce stimulus proposal today
- The proposal may reach $2 trillion and is expected to include aid for the unemployed, direct payments for individuals, and funding for states and local governments, schools, small businesses, healthcare facilities, and vaccine distribution.
- Today’s plan is most likely an “opening bid” rather than a proposal that can pass with bipartisan support.
- A package in the $700 billion to $1 trillion range is likely to pass within the next month or so.
- An additional spending package with more of Biden’s agenda (infrastructure, renewal energy) along with proposed tax increases likely will wait until the summer.
Emerging markets and the United States lead Q4 earnings comeback
- Increases in estimates during Q4 2020 and improving growth prospects for 2021 have driven next 12 months consensus earnings per share estimates for the S&P 500 Index to within 5% of its pre-pandemic level on January 1, 2020 (source: FactSet).
- Emerging markets earnings have come back further, falling just 3% short of prior highs.
- Developed international earnings estimates have lagged and remain more than 10% below January 1, 2020, levels.
- We expect US and emerging markets estimates to surpass prior highs after earnings season and help support further gains for these markets this year.
Beige Book shows modest growth in December
The Federal Reserve’s (Fed) Beige Book, a qualitative assessment of economic conditions in the Fed’s reporting districts, revealed rising COVID-19 cases pressured economic activity.
- Two of the Fed’s 12 districts reported no growth in recent weeks.
- Two other districts reported declines in activity as restrictions on activity limited economic growth.
LPL Research upgrades financials, downgrades communication services
In our most recent Global Portfolio Strategy, we decided to upgrade financials from negative to neutral as rising yields and an expanding economic environment provide tailwinds to the sector. Meanwhile, we’ve downgraded communication services to neutral. We take a closer look at our sector views in today’s LPL Research blog.
MLK Jr. Day observed January 18
LPL Financial along with the stock and bond markets will be closed Monday, January 18, in observance of Martin Luther King, Jr. Day.
The United States reported 219,000 new COVID-19 cases Wednesday, down 10% week over week. This is the fourth straight day under the 7-day average (source: COVID Tracking Project).
- Current hospitalizations in the United States tallied the first week-over-week decline since September 2020.
- China recorded its first COVID-19 death since April 2020 as new clusters of cases have appeared there.
What 2021 Policies Could Mean for Your Investments
In this week’s Market Signals podcast and video, LPL Research talks about 2021 policy updates and the possibilities of higher taxes and more regulation, more stimulus, higher Treasury yields, and better stock performance in 2021.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
All index and market data are from FactSet and MarketWatch.
This Research material was prepared by LPL Financial, LLC.
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