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M Notes: Mon, 1-4 Thumbnail

M Notes: Mon, 1-4


Thoughts on last year:


When I think of last year, the Dickens title A Tale of Two Cities comes to mind.  “It was the best of times; it was the worst of times.”  2020 was certainly a year of extremes.  

Oil started the year about $61/barrel.  In April, on one day it dropped to -37/barrel.   It finished at $48/barrel.

GDP hit a record low of -31% in Q2, before hitting a record high of +33% in Q3.

The U3 unemployment rate started the year at 3.5%, rose to 14.7%, and finished the year at 6.7%.  

The Dow started the year around 28,500, dropped to 18,200, and finished over 30,000.

The U.S. Debt is now over $27 Trillion.

And we saw not one, but two, fiscal bills over $2 Trillion pass thru Congress.  One in March and one in December.  

When my son was home for Christmas we talked about Markets and the economy. He said he felt that Markets were detached from what was really happening.  That a handful of companies, mostly tech related, seemed to be driving Markets.  I added that many people, especially small service businesses, are in real trouble.  And I added that we haven’t really felt the depth of the economic impact from the shutdowns yet.  

“It was the best of times (for a few), it was the worst of times (for many).” 


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This Week:


Focus of the week:  Normally, I would have said the updates on jobs and unemployment would have been the focus of the week.  But that isn’t what I’m going to write about.  Futures were up a lot this morning and the Markets opened higher.   The S&P was up about +13 to +14 at the open.  But it was short lived.  As I write this the S&P is down -80.  That has my attention.  It might be down due to the uncertainty in Washington this week.  But at this point, early Monday afternoon, no reason is being given.  

What will the Markets rally on in 2021?  The negative move on the first trading day of the new year kinda confirms the concern I felt at the end of last week.  The Fed has announced is won’t be raising their interest rate for the next three years, so that’s already baked in.  There’s political turmoil in Washington, and I don’t see much that should encourage Wall Street from a Biden administration.  And even less if Dems win the two Senate seats in Georgia and take the country significantly Left in policy positions.  If those seats stay Republican, I could see Markets rallying on divided government.  But that would be a short move, not a prolonged move.  Will Markets continue to be driven by 10 large (mostly tech) companies?  It’s possible, but I have doubts.  I’ve heard some say that the vaccines will get us back to normal.  Maybe, but how long will that take?  I’m generally a pretty optimistic guy, but I don’t see a lot of upside in the immediate future.  And sitting near all-time Market highs… has me a bit cautious.  

Jobs & Unemployment:  The prior jobs number was 245,000.  The consensus is for 100,000 on Friday morning.  Unemployment is expected to increase a tick up from 6.7% to 6.8%.  

Indicator focus ISM manufacturing data (Tue); ADP employment report, FOMC minutes (Wed); international trade, jobless claims (Thu); and the latest jobs and unemployment numbers (Fri).