Weekly Market Update

Last Week Recap:


The Dow and S&P 500 gave up some returns on Friday but all major markets were up on the week led by big tech; S&P 500 1.94%, Dow 0.59%, Nasdaq 4.19%, Russell 2000 2.15%. The recent outperformance of Value over Growth took a break this week as overseas new Covid-19 restrictions are being put in place and the European Central Bank warned that the euro area is headed for a double-dip recession. Government bond yields fell and gold rallied. The FAANGs, were up 6-15% on the week. In his first day in office, President Biden issued over a dozen executive orders to combat the virus and said he would invoke the Defense Production Act. Also, new Treasury Secretary nominee Janet Yellen urged lawmakers to act big on combating the fallout from the virus now and proposed using longer term debt like a 50 year bond. It was another wild week for Bitcoin as it dropped below $30k, down 30% from it's high of $42k just a couple of weeks ago.


The Week Ahead:


It is going to be a busy week for earnings with more than a fifth of the S&P 500 reporting this week. So far earnings have been primarily been beating expectations but we should see how much the resurgent pandemic is slowing down consumer activity when we get data on 4th quarter GDP this week. Last week President Biden proposed a $1.9T stimulus package but it seems like there may not be enough bipartisan support for such a large package. However, we may see Speaker Pelosi send articles of impeachment to the Senate which will further take the focus away from the stimulus efforts. One of the biggest stories to impact the markets that has come about partly due to the pandemic and more investors working from home is the large uptick in trading activity by small investors on platforms like Robinhood. Using communication services like Redditt's "wallstreetbets" several stocks have irrationally made huge movements such as Kodak, Hertz, Tesla and most recently GameStop. Two weeks ago GameStop was trading at $20 and is set to open this week near $100. It will be interesting to see how this trading activity will impact the markets going forward. The Fed meets this week and although it is widely expected to keep rates unchanged, it's statements will be closely watched for any indication of changes to it's outlook for the next couple of years.


Sources: Seeking Alpha, TD Ameritrade, J.P. Morgan, StockTwits,

 

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