Weekly Economic Update presented by Meld University

Weekly Riddle:

“Defense”, “Laughing”, “Stubborn”, “Hijack”. What is so peculiar about these four words?

Tune in next week for the answer.
(Last week's riddle and answer can be found near the end of this post.)

Join us for our next event: Social Security: What You Need to Know to Maximize Your Retirement Income with speaker Pat Burris CFP®.

The webinar will be held on January 26th at 3:00 PM Central Time. There is no cost to attend, but you must register in advance.

 

Weekly Economic Update

LAST WEEK AND THE ECONOMY

Equity markets retreated last week, concluding with losses of more than 1% in some major indices. This move came as Wells Fargo and JP Morgan kicked off earnings season with strong numbers. Investors seem to be worried about the economic outlook, with vaccine distributions failing to meet expectations and new strains of Novel Coronavirus spreading in Europe and in the U.S.

The Nasdaq Composite index fell 1.54%, the Dow Jones Industrial Average sank 0.91% last week, and the S&P 500 dropped 1.48%. The MSCI EAFE index, which tracks developed overseas stock markets, fell by 1.36%.

Winter COVID-19 Surge Driving Rising Layoffs and Falling Retail Sales

Initial claims for unemployment benefits rose by the highest level since the start of the pandemic. The 965,000 applications are also the highest level since August and, coupled with the latest jobs report, indicate issues with the recovery. To dampen the impacts of these labor market declines, the latest stimulus bill contained a $300 per week federal supplement for those receiving unemployment, and that figure may be going higher with an incoming Biden administration.

Retail sales have also continued to suffer, failing to meet expectations again in December. The 0.7% drop last month was the third straight month of decline for the metric.

Senate to Tackle Challenges in Coming Weeks, Including Impeachment

President-elect Joe Biden will be inaugurated on Wednesday, becoming the 46th president of the United States, and the Democrats will hold majorities in both houses. This new administration plans to hit the ground running with further stimulus for Americans that are still struggling from the pandemic. Biden’s recently revealed stimulus package is estimated to cost around $1.9 trillion and plans to include $1400 more in direct payments, extend federal unemployment benefits to $400 per week, and aid for schools and state and local governments.

On the other hand, the proposal also contains a few of the Democrats “wish-list” items, like a $15 minimum wage, which could delay the rollout if there is opposition. A minimum of a party line vote in the Senate would be necessary for the bill to pass through the budget reconciliation process, a strategy used to pass the Tax Cuts and Jobs Act in 2017.

Last week, the House impeached the President for “Incitement of Insurrection”, and ten Republicans joined Democrats in the impeachment vote. A 2/3 majority vote is necessary from the Senate for conviction, so 17 Republican senators would need to flip sides.

Key Economic Data

Unemployment Rate:             6.7% (As of December 2020 – Next Report: 2/5/21)

FOMC Target Rate:                 0 – 0.25% (As of December 16, 2020 – Next Report: 1/27/21)

Data Sources: U.S. Bureau of Labor Statistics, FRED – St. Louis Fed

Weekly Quote:

Develop success from failures. Discouragement and failure are two of the surest steppingstones to success.
-Dale Carnegie

The Week Ahead – Key Economic Data

Thursday: Jobless Claims, Housing Starts and Permits, Philadelphia Fed Manufacturing Index.

Friday: PMI Composite Flash, Existing Home Sales, EIA Petroleum Status Report.

Source: Econoday

The Week Ahead – Companies Reporting Earnings

Tuesday: Netflix, Inc. (NFLX), Bank of America Corporation (BAC), The Goldman Sachs Group, Inc. (GS), The Charles Schwab Corporation (SCHW).

Wednesday: United Health Group Incorporated (UNH), Proctor and Gamble Company (PG), Morgan Stanley (MS), United Airlines Holdings Inc. (UAL), Discover Financial Services (DFS)

Thursday: Intel Corporation (INTC), International Business Machines Corporation (IBM)

Friday: Ally Financial Inc. (ALLY) Source: Zacks

Weekly Tip:

People who consistently work with a financial advisor can feel more at ease about their finances. So, make a move to reduce your stress during these difficult times by talking to an experienced financial professional about your retirement plan.

Closing value of some major equity indices.
S&P 500 chart at end of last week.

Data Sources: Yahoo Finance, WSJ

Join us for our next event: Social Security: What You Need to Know to Maximize Your Retirement Income with speaker Pat Burris CFP®.

The webinar will be held on January 26th at 3:00 PM Central Time. There is no cost to attend, but you must register in advance.

 

Last Week's Riddle and Answer

Last Week's Riddle:
I am at the source of every apple. I am a part of every man and foremost in every apprehension. Every day, you can find me, but it’s really easy to find me in Autumn. It’s a pity that you cannot see me in the air, and yet it’s so wonderful that I can be found in any ocean! Who am I?

Last Week's Answer:
The letter 'A'.

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