The Week on Wall Street
Stocks moved higher during a holiday-shortened week of trading, capping off a turbulent, but otherwise strong year for equity investors.
The Dow Jones Industrial Average gained 1.35%, while the Standard & Poor’s 500 increased by 1.43%. The Nasdaq Composite index, which led all year, added 0.65%. The MSCI EAFE index, which tracks developed overseas stock markets, rose 2.02%.
The Year in Brief
The global pandemic disrupted economies, financial markets, and daily life in 2020. Households and businesses were put to the test during the toughest and grimmest years in decades. The winter brought a resolution to the U.S.-China tariff dispute, the Brexit referendum, and the first U.S. appearance of the novel coronavirus. As spring started, abrupt stay-at-home orders in response to COVID-19 curtailed business activity, which dampened consumer spending. The federal government responded, arranging stimulus payments for millions of Americans.
Wall Street bounced back from its March downturn, but the economy limped along. The pandemic entered its worst phase in fall, but two highly promising vaccines were announced in November, and as winter started, they began to roll out to the public. On the cusp of 2021, Congress approved a second national economic stimulus, and the European Union and United Kingdom signed off on a post-Brexit trade deal.
There are many unanswered questions as we enter 2021. Will mass vaccination happen as quickly as we anticipate? Will a successful vaccination program lead to more hiring, more travel, more in-store shopping, and more confidence? The financial markets will be watching progress on this effort.
The U.S. Economy
The pandemic sent the U.S. economy into an abnormal phase, and so our fundamental economic indicators displayed atypical readings.
The Department of Labor’s main jobless rate, 3.5% in February, hit 14.7% by April. Headline unemployment declined for the next seven months, to 6.7% by November. The U-6 unemployment rate, measuring unemployment and underemployment, peaked at 22.8% in April.
As people stayed home, consumer spending trended lower, falling 6.9% in March and 12.6% in April.
The federal government moved to boost economic activity. As March ended, a $2 trillion economic stimulus bill became law, featuring cash payments to households, temporary increases in federal unemployment benefits, and a Small Business Administration program pledging to offer distressed companies funds equivalent to 8 weeks of payroll costs. The aid began rolling out in April, and in May, the White House unveiled Operation Warp Speed, a public-private partnership intended to produce COVID-19 vaccines in record time. Two vaccines were approved by the Food and Drug Administration by fall.
The Federal Reserve took the benchmark federal funds interest rate down to a target range of 0-0.25%, and revived emergency loan programs first introduced in 2008. It collaborated with the Department of the Treasury on efforts to buy corporate bonds and encourage business loans. In a monetary policy shift, the central bank said in August that it would accept average inflation of 2% for the near term, and was willing to tolerate a little more inflation in the economy while pursuing the goal of full employment.
As stay-at-home orders lifted, the economy rebounded. Gross domestic product, which the Bureau of Economic Analysis said had contracted 31.4% in the second quarter, grew 33.4% in Q3. The BEA also recorded a 41.0% Q3 climb for consumer spending. Stay-at-home orders returned in Q4, however, prompting another federal economic stimulus in December.
The housing market stayed strong. By November, existing home sales were up 25.8% year-over-year, according to the National Association of Realtors; Census Bureau data showed a 20.8% annualized improvement for new home buying.
The U.S.-China tariff dispute eased throughout the year. In the January 2020 trade talks, the U.S. promised to lessen import taxes on Chinese goods, and China agreed to buy more American exports.
The Global Economy
The International Monetary Fund expects the world economy will contract 4.4% in 2020. If that estimate holds, 2020 will be the worst year for global growth since the 1930s. The U.S. economy shrank 4.3% in 2020, according to the IMF’s forecast. That is better than the 8.3% setback estimated for the eurozone. The IMF projects that China’s economy grew 1.9% last year. As for 2021, it sees GDP advances of 8.2% for China, 5.2% for the eurozone, and 3.1% for the U.S.
The European Union and United Kingdom agreed to a post-Brexit trade deal on December 24. This completed the Brexit process, which began with the 2016 leave vote and included the U.K.’s formal exit from the E.U. last January. Businesses and financial firms based in the U.K. now face new trade rules and costs, even with the new pact in place.
Looking at stock benchmarks around the world, there were more ups than downs. South Korea’s Kospi Composite stood out with a 30.75% 2020 gain. Argentina’s MERVAL climbed 22.93%, Taiwan’s TWII 22.80%. Two other notable 2020 advances: Japan’s Nikkei 225 added 16.01%, and China’s Shanghai Composite rose 13.87%. There were also notable retreats: Indonesia’s IDX Composite lost 5.09%, France’s CAC 40 7.14%, Russia’s RTS 10.42%, and Spain’s IBEX 15.45%. The MSCI EAFE index, a broad benchmark tracking developed-economy stock market performance in Europe and Asia, rose 5.43%.
We join all Americans in happily drawing the curtain on 2020. Though it was a challenging and tragic year for so many, there are good reasons to believe that 2021 will be a year of progress in returning to our pre-pandemic normal. We wish you and your family a healthy and happy new year!
THIS WEEK: KEY ECONOMIC DATA
- Tuesday: Institute for Supply Management (ISM) Manufacturing PMI (Purchasing Managers Index).
- Wednesday: Automated Data Processing (ADP) Employment Change, Factory Orders.
- Thursday: Initial Jobless Claims, ISM Non-Manufacturing PMI.
- Friday: Employment Report.
Source: Econoday, December 31, 2020
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THIS WEEK: COMPANIES REPORTING EARNINGS
- Thursday: Micron Technologies (MU), Constellation Brands (STZ), Walgreens Boots (WBA), Conagra Brands (CAG)
Source: Zacks, December 31, 2020
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
“To succeed in life, you need three things: a wishbone, a backbone, and a funny bone.”
– Reba McEntire
Recipe of the Week
SLOW COOKER SAUERKRAUT AND KIELBASA
- 1 (32 oz) jar Sauerkraut, drained (rinsing is optional)
- 2 lbs. Kielbasa Smoked Sausage, cut in 1 1/2″ rounds
- 1 lg Apple, chopped
- 1 med Sweet Onion, diced
- 1 Tbsp Caraway Seeds
- 2 cloves Garlic, minced
- 1 cup Apple Cider
- 1 cup Water (or beer)
- 2-4 Tbsp Brown Sugar (or to taste)
- Add the sauerkraut, kielbasa, apple, onion, caraway seeds, and garlic to the slow cooker crock. Stir.
- In a separate container mix together the apple cider, water, and brown sugar. Pour over the sauerkraut mixture.
- Cook on high for 4 hours, or low for 6-7 hours.
Recipe adapted from SimplyHappyFoodie
Tax Benefit and Credits: FAQs for Retirees
Lots of questions can come up about income taxes after one has retired. Listed are answers to just a few common questions from retired taxpayers.
What types of income are taxable?
Some common types of taxable income include military retirement pay, all or part of pensions and annuities, all or part of individual retirement accounts (IRA), unemployment compensation, gambling income, bonuses and awards for outstanding work, and alimony or prizes.
What types of income are non-taxable?
A few examples of non-taxable income are veteran’s benefits, disability pay for certain military or government-related incidents, worker’s compensation, and cash rebates from a dealer or manufacturer of an item you purchased.
Why is my pension taxed?
It depends on how the money was put into the pension plan. For example, if all the money were contributed by the employer or the money was not taxed before going into the plan, it would be taxable. When your contribution is from already-taxed dollars, that portion of the pension is not taxed, but must be recovered over your life expectancy.
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS
Working On Your Golf Game In Winter
It can be frustrating to make great strides in your golf game during the golf season only to see it come to an end due to the weather. You end up sitting inside all winter, letting your swing digress and your body lose its flexibility.
One of the best ways to keep your golf game up to par is to work on your flexibility. Flexibility is often overlooked as one of the more important centerpieces to a well-rounded golf game. Stretching is one way to preserve flexibility as well as increase it.
Flexibility is important because it contributes to a fluid golf swing, allowing the body to turn as needed during a swing. It can even add distance to your golf clubs when improved as well as maintain distance as you age.
Focus on hip-flexor stretches as well as hamstring stretches.
You can also work on your shoulder turn by sitting in a chair and twisting your body as far as possible without risking injury. Use the chair as leverage by grabbing it to hold your turn for a few seconds, stretching your back and core muscles.
Tip adapted from GolfPracticeGuides
Practicing Gratitude in the New Year
Instead of beginning the new year with a list of resolutions, start by examining the good things that are already in your life by practicing gratitude.
Psychologists have defined gratitude as a positive emotional response to receiving a benefit from someone. In positive psychology, gratitude is the human way of acknowledging the good things in life. Thankfully, gratitude is something you can learn if it does not come innately.
There are benefits to practicing gratitude, especially in times of stress and uncertainty. Gratitude invites positive emotions that can have physical benefits, through the immune and/or endocrine systems. Research shows that when we think about what we appreciate, the parasympathetic or calming part of the nervous system is triggered, which can have protective benefits for the body-including decreasing levels of the stress hormone cortisol and increasing oxytocin, the bonding hormone involved in relationships that make us feel good.
There are a few great ways to get started today and practice gratitude in your own life:
Write thank you notes
Keep a gratitude journal
Follow-up with family and friends
Give back to your family, friends, and community
Pay kindnesses forward
Tip adapted from Psychology Today
Next Stop for Your Christmas Tree: Recycling
Once your tree has brought cheer during the holiday season, you can help the environment by recycling your tree in one of several different ways. If you purchased a live-rooted tree, then you can plant it after the holidays. Otherwise, check out these recycling options.
Curbside service: Many municipalities offer curbside collection of Christmas trees. You will need to remove decorations and stands, and there may be restrictions on size and flocking, so be sure to check with the Environmental Services division in your town.
Drop-off centers: Right after Christmas, look for Christmas tree recycling drop-off locations. Just drop and go! The trees will likely be brought to your local landfill and chipped into mulch and compost for public use.
Nonprofits and Boy Scouts: You can call to schedule a pickup of your used Christmas tree by local nonprofits or Boy Scouts, which may require a small donation that goes to a good cause.
Yard waste pick-up: If you have yard waste pick-up in your neighborhood, you can cut up your tree into pieces that will fit into the bin.
Christmas trees are the gifts that keep on giving because they are biodegradable for recycling and reuse.
Tip adapted from RealChristmasTrees
 The Wall Street Journal, December 31, 2020
 The Wall Street Journal, December 31, 2020
 The Wall Street Journal, December 31, 2020
 Trading Economics, January 2, 2021
 CNN Business, May 8, 2020
 Investing.com, January 2, 2021
 Los Angeles Times, December 18, 2020
 Treasury.gov, January 2, 2021
 New York Times, December 23, 2020
 Reuters, August 27, 2020
 The Balance, December 27, 2020
 Reuters, December 22, 2020
 Census Bureau, December 23, 2020
 NPR, January 15, 2020
 Seattle Post-Intelligencer, December 31, 2020
 CNN Business, October 13, 2020
 The Week U.K., December 23, 2020
 Barchart.com, December 31, 2020
 Wall Street Journal, January 1, 2021
 SimplyHappyFoodie.com, January 1, 2021
 IRS.gov, January 1, 2021
 GolfPracticeGuides.com, January 29, 2020
 PsychologyToday.com, October 10, 2020
 RealChristmasTrees.org, January 1, 2021