Last Week Recap:
Markets set additional all time highs last week for the first trading week of 2021. This was despite a weak December Jobs Report and the chaos in Washington (S&P 500 1.83%, Dow 1.61%, Nasdaq 2.43%, Russell 2000 5.91%). Small caps continued their huge run, Value outperformed Growth again, U.S. crude oil topped $50 for the first time since last February, the 10-year Treasury rose above 1% for the first time since March, and Bitcoin surged to over $40,000. Meanwhile the labor market reported a drop of 140,000 jobs for the first decline since April. The labor market still has about 10 million less jobs than it did in February. Also, the U.S. has been facing the worst it has seen in cases and deaths from Covid. The markets continue to push higher despite everything that is going on because of the belief that now with Democrats having the slight majority in the government we should additional fiscal stimulus in relatively short order. This slight majority is also causing many investors to believe that the Government will be able to provide additional stimulus but might not be able to accomplish the full extent of President-Elect's tax agenda. Meaning that they may not be able to raise taxes as much as proposed, especially on corporate rates which would hurt corporate profitability and earnings.
The Week Ahead:
Futures are pointing to a lower open for the start of this week. Many social media platforms decided to block President Trump's account and as a result many of their shares are down big to start the week. We are also likely going to continue to hear news about potential impeachment proceedings for Trump following the events in DC last week. The annual Consumer Electronics Show kicks off today but it is going to look a lot different this year as it strictly virtual. We will also see some earnings this week from big banks and will get economic reports on retail sales, small business optimism, and key inflation data.
Sources: Seeking Alpha, Y-Charts, TD Ameritrade, Stocktwits