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What you need to know in 5 minutes - Dec 42, 2020?
The stage is set for President-Elect Joe Biden to take over next week and Mr. Market is feeling pretty good about the new Prez, a unified legislature, and a possible 3rd stimulus. Despite the chaos of the week the market continues to hit all-time highs.
Democrats take the Senate
Where do we even start? DC riots, et. al.
Total Number of People Initiating Vaccination in the US (1st Dose Received): 6,688,231
What's driving the market?
Congress changes colors
Democrats take the Senate: President Trump will be the first sitting President since 1932 to lose their party’s control over both the executive and legislative branches of government.
A weak jobs report: The Bureau of Labor Statistics confirmed the slowdown in the labor market.
How about another stimulus?: President-elect Biden announced that his administration is assembling an additional multi-trillion dollar stimulus package.
But what does it mean?
With the Senate race finished, the stage is set for Biden to take over with a unified legislature next week. The incoming President will need to act swiftly to repair the economy which lost 140,000 jobs in December, ending a seven-month streak of recovery. Furthermore, the unemployment rate has stabilized at 6.7% (10.7 million Americans) significantly higher than the pre-pandemic level of 4.4%.
The accumulating negative outlook makes a case for further stimulus approval and a dovish approach to reactivate the economy in the near term. The latest stimulus bill may feature further unemployment and stimulus checks, supplementary small business support, and extra vaccine distribution efforts.
What else should I know?
It's only a coup if it comes from the coup d'etat region of France. Otherwise, it's just sparkling white supremacists assaulting the Capitol.
US Capitol overrun by Trump supporters: Rioters breached Congress on Wednesday afternoon to pressure lawmakers to overturn the results of the presidential election.
Social media platforms restrict Donald Trump: Facebook, Twitter, and Instagram banned or limited the President’s ability to communicate in an attempt to “curb incendiary speech.”
Trump impeachment 2.0: House democrats plan to impeach the President for a second time on the grounds of “incitement of insurrection”. Moreover, House Speaker Pelosi urged VP Pence to invoke the 25th amendment to remove the President from power.
But what does it mean?
January 6, 2021 was truly a sad day in American history.. Curfews have been enforced, more than 90 people were arrested, and five people lost their lives. In the fall out, technology and social media companies have limited Trump’s and Parler’s access to their platforms to curb incendiary speech and have sparked conversations regarding their role in free speech and potential new regulations.
The upcoming weeks will be riddled with protests and mainstream media “white noise” heading into the Biden inauguration. Meanwhile, Mr. Market was unphased by these events; an important reminder that the stock market is not necessarily reflective of news headlines. We, however, are wondering if anyone knows how to cancel the 7-day free trial on the 2021 subscription?
Up next on...
TL;DR, look at these:
Pay close attention to the CPI report coming out on Wednesday, as inflation has been a hot topic lately. It’s not an immediate concern but definitely something to keep in mind with an incoming dovish administration.
Friday’s retail sales and consumer sentiment figures will be crucial in understanding how the US economy fared in December and how things may look for Q1 2021.
Monday: Chinese CPI, Bank of England’s Governor’s speech, Australian retail sales
Wednesday: US CPI, Fed’s Beige Book, Eurozone industrial production, Chinese FDI
Thursday: US Fed Chairman speech, jobless claims, Chinese Trade balance figures
Friday: US retail sales, consumer sentiment index, industrial production, Eurozone Trade balance, UK GDP, industrial and manufacturing production
What’s an investor to do?
How come? Joe Biden takes over with a unified legislature next week, and a 3rd stimulus package may be on its way. Investors now have more clarity on what to expect from the Biden Administration.
What to do? Bubble talks have picked up significantly over the past couple of weeks. Globally, countries are propping up their economies with significant stimulus packages, increasing spending across both businesses and consumers, which is likely driving recent market rallies. However, valuations will eventually need to stabilize. Be wary of rallies in high-growth sectors (i.e. tech, pharma, crypto) that have been driving the market over the last semester with abnormal returns.
Timing the market or a bubble is a monumental feat, and FOMO tends to wreck experienced and inexperienced investors alike. If you’ve already obtained substantial returns definitely consider the profit levels you’d be comfortable walking away with in the event of a correction and utilize stop losses to protect those profits. Focus on finding value in reopening or overlooked industries that may recover in the coming months such as financials, energy, retail, and travel.
For the curious investor:
Pushing a Blue agenda: The blue wave is here – with it likely another fiscal stimulus package and a liberal-friendly agenda.
The consumer discretionary sector (i.e. retail, leisure, entertainment) may be poised for a short-term boost with an incoming stimulus and continued COVID vaccinations. Consider financially sound companies that may benefit from this scenario such as:
Green energy, technology, and cannabis are generally regarded as “liberal-friendly” sectors and may sustain longer-term rallies with the incoming administration and a unified legislature. Consider broad positions through ETFs for industry-wide exposure such as:
Earnings season kicks off this week: Big banks are up first! Although analysts expect earnings to decline for the general market in Q4, their focus is on how far earnings fell and what banks project for 2021. Check out our post on what retail banks can tell you about the economy before diving into the earnings reports.
Banks: J.P. Morgan, Blackrock, Wells Fargo, Citi, PNC, First Republic
New Kids on the ‘Street’:
Financial lender Affirm is expected to IPO with a new valuation on Wednesday.
SoFi announced it will be going public via Chamath Palihapitaya’s SPAC.
If you didn’t know, now you know
Presidential elections are underway in Uganda this week. Bobi Wine is running against the incumbent, Yoweri Museveni, who has been in power since 1986. Museveni may have had many notable achievements as president; however, Musevani has utilized the military, which also operates as the police force, to harass his opposition. Over 50 people have been killed by security forces leading up to the election. Wine’s supporters – journalists, human rights activists, and critics of the government – have been harassed and subsequently dispersed. Wine himself was shot at and arrested.
This summary only covers the surface of the conflict. To read more, click here.
What we’re vibing:
The Flight Deal Daily Newsletter - A great, quick way to check great prices for wanderlusters in the U.S. For those with a 2021 resolution to travel more, this is your budget-friendly solution.
Your Life in Weeks by Tim Urban - Author of the “Wait but Why” newsletter created a Life Calendar. Looking to kick a little urgency or reflection into your day? Give it a look.
Atomic Habits by James Clear - If you’re looking to build new habits or routines or break bad habits, this is by far the best book on habit building written.
What’s grinding our gears:
People who bring their speakers out on hikes. Seriously, no one came to the woods to listen to your shitty music. How the hell are we supposed to find BigFoot when you keep scaring him away with your Nickleback playlist? What’s grinding your gears? Tweet us at #WTMGrindsmygears
Good News Everyone!
Do you know one friend that should read this today?😁
- Max & Thomas
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This writing is for informational purposes only and the author/s undertake/s no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. The author/s expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.