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The Bottom Line

● A mania around heavily‐shorted stocks, weaker than expected GDP data, and disappointing new vaccine results weighed on global stocks this week. Most major indices fell ‐3to‐4%, the worst week since October.
● The Cboe Volatility Index (VIX) spiked to 33.1 from 21.9 last Friday. However, bonds weren’t bothered much by all the stock commotion as the 10‐year U.S. Treasury yield was down two basis point to 1.07% (though it fell to 1% earlier in the week).
● The US economy expanded at a +4% annualized rate in the final quarter of 2020 and contracted ‐3.5% for the full year, its worst performance since 1946.

GameStop craze & vaccine blues

Headlines for much of the week were dominated by the story of heavily‐shorted small‐cap stocks, such GameStop and AMC Entertainment, making spectacular gains after the hedge funds that were short the stocks had to liquidate their positions to raise cash. Markets have concerns that the “short squeezes” could cause losses at the brokers/clearing firms that trade the stocks or that it may force the hedge funds who bet against the stocks to sell other securities to raise money to cover their loses. What also really matters to the markets is the state of the pandemic. So disappointing news on new vaccines, especially regarding the more virulent mutations emerging from the U.K., South America and South Africa, is bad for markets. That was certainly the case on Friday when trial results from Johnson & Johnson’s coronavirus vaccine disappointed some investors. Stocks dropped about ‐2% Friday, but many pandemic‐sensitive stocks, such as travel, cruise, and airline stocks, were down ‐5% or more. Markets had already been weighed down on Thursday, after GDP data showed the economy was running about ‐5% below where it would have been if the pandemic didn’t occur, and that growth stalled toward the end of 2020.

Digits & Did You Knows

ON HOLD — 5.5% of homeowners have postponed mortgage payments, about the same for the past two months. That is down from a peak of 8.6% in June, but some economists are worried that the stalling forbearance rate could worsen if the economy loses more jobs (source: Wall Street Journal).
GOING MY WAY? — The 3 most popular states to move into during 2020 were Tennessee, Texas and Florida. The 3 states with the greatest outflow of people were California, Illinois and New Jersey. The 2020 rankings are based upon more than 2 million rentals of moving trucks for “1‐way” interstate movement of furnishings, personal possessions and clothing (source: U‐Haul Migration Trends 2020, BTN Research).

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Source: Bloomberg. Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange‐traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds may be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐YieldBond(iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 ValueETF);MidGrowth(iSharesRussell Mid‐CapGrowthETF);MidValue (iSharesRussell Mid‐Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4%Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.

Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a
Registered Investment Adviser. PCIA doing business as Prime Capital Wealth Management
(“PCWM”) and Qualified Plan Advisors (“QPA”).
© 2020 Prime Capital Investment Advisors, 6201 College Blvd., 7th Floor, Overland Park, KS 66211.

Chris Bouffard
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