The Bottom Line
● Don’t tell December that it was a November to Remember. The S&P 500 large‐cap index, the tech‐heavy Nasdaq Composite, and the Russell 2000 small‐cap index all closed out the first week of December, right where they ended November, at new record highs.
● It is hard to sugar coat the November employment report, which disappointed in almost every aspect of the labor market. So the market rallied to new record highs. Apparently the hope for new aid outweighs job creation.
● Manufacturing and factory activity remains healthy as Factory Orders were solid in October and manufacturing PMIs were healthy in November.
Back to “Bad News is Good News”?
Global markets roared to record highs in November on the positive news of multiple vaccine advances, but it seems that things suddenly pivoted back to a “bad news is good news” paradigm on Friday. How else can one explain major market indices vaulting to yet more record highs when the news of the day was a definitely bad November employment report, which showed a sharp decline in job growth across broad swaths of the economy. With coronavirus worsening across the country it shouldn’t be a surprise that the job market may be stalling, but the latest data was very disappointing. The Labor Department reported that the economy added just 245,000 jobs in November, well short of the 440,000 economists expected and far weaker than October’s gain of 610,000. So why again did markets rally on such bad news? Well the consensus narrative is that such a disappointing jobs picture could push both Congress and the Federal Reserve to move faster on additional fiscal and monetary stimulus. Just this week a bipartisan group from the House and Senate seemed close to a finding consensus for a new $900 billion aid package, and Fed officials meet later this month where the labor situation will likely be a prominent focus.
Digits & Did You Knows
IS THIS YOU? ‐ 62% of the average net worth of an American household comes from just 2 assets – the equity they have built up in their home and the value of their retirement accounts (source: Census Bureau, BTN Research).
CHEAP GAS ‐ The average price of gasoline was $2.12 a gallon as of last Friday 11/27/20. The average price of gasoline hasn’t closed a calendar year that low since finishing 2015 at $2.00 a gallon (source: AAA, BTN Research).
NOT YET ‐ 5 of 8 Americans surveyed (62%) in late October 2020 describe their life as “not yet back to normal” in the year of COVID‐19 (source: Gallup, BTN Research).
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.
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