-Darren Leavitt, CFA

Financial markets started 2021 in strong form but lost some ground in the final week of trade.  Covid-19 vaccines continued to be developed, and inoculations continued to be administered to front line workers and the elderly.  A light at the end of the tunnel helped stabilize sentiment even as specific geographies imposed further coronavirus lockdown measures.  A Democratic sweep in the Georgia Senate seat run-off election gave the Democrats a slim majority in Congress and increased another fiscal stimulus tranche’s likelihood.  The win also opened the door for President Biden’s green initiatives, which bolstered electrical vehicle issues and other alternative energy companies.   Economic data continued to be mixed, and the January Federal Reserve meeting was as expected.

For the month, the S&P 500 lost 1.11%, the Dow fell 2.04%, the NASDAQ gained 1.42%, and the Russell 2000 outperformed with a return of 5%.  Emerging Markets gained 3.17%, and Developed international markets fell 0.78%.  The US Treasury curve steepened as the 10-year bond yield traded above 1%.  The 2-year note yield decreased one basis point to 0.11%, while the Ten-year bond yield closed the month up fifteen basis points to 1.09%.  Gold prices fell $43.20 or 2% to close at $1850.50.  Oil prices continued to climb, closing up 8% or $3.91 to $52.18 a barrel.

Investor’s risk appetite continued into the New Year as vaccinations were put into more arms and on hopes that more stimulus would be coming down the pipe.  Logistics around inoculations were criticized throughout the month with efforts not living up to what had been promised.  Shortages of vaccines and the lack of proper healthcare workers/facilities available and in place were reported on often.  Despite the hang-ups, the rate of infections across the globe slowed later in the month. The slower pace of infections was most likely due to the additional lockdown measures that continued to hinder the global workforce.

Here in the US, job creation in January was slow but a bit better than the negative Non-farm payroll number seen in December.  The weak data from initial claims and continuing claims for some validate calls for more stimulus.  The Georgia Senate run-off race provides a slim Democratic majority in Congress that increases the likelihood of more stimulus.  The Biden administration has outlined another 1.9 trillion dollars “American Rescue Plan” that will put another $1400 in direct payments to US households.  The Federal Reserve’s January meeting was as expected.  The Fed left the Fed Funds rate unchanged at 0-.025%.  Fed Chairman Powell continued to call on Congress for more fiscal stimulus and commented that recent strong market action was likely due to positive vaccination developments and on the notion that more fiscal stimulus was coming.

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