We hope this message finds you safe and well as we approach Thanksgiving. It is a time to reflect on the positive things in life, something not always easy to achieve in this most unusual year. We hope the season gives you some time to catch your breath, and to reconnect with family and friends.
It is a shortened week in the US markets, though a busy one with the virus versus vaccine race ramping up, stimulus talks, and election consequences all in the mix. In a little reported but potentially significant development, Treasury Secretary Steve Mnuchin declined to renew several lending programs that the Federal Reserve had used to support corporate bonds and the corporate bond market. It’s a positive sign that Treasury feels that the bond market is functioning well enough that support is no longer needed. But as one well known portfolio manager quipped, “the training wheels have now come off.” Both stock and bond markets will be watching carefully for any signs of stress in the lending markets now that they are no longer backstopped by the Federal Reserve. And of course, so will we.
What Happened Last Week:
Equities were mixed as they digested their large gains from the previous week. Technology and large cap stocks were down slightly, while small cap stocks posted another weekly gain. This rotation out of technology and large companies into the smaller ones continues as part of the investing theme of an expected end to the pandemic and the associated restrictions.
Bond markets were positive across the board as both corporate and municipal bonds posted solid gains for the week. The yield on the US Treasury’s 10 year note (which moves in the opposite direction of price) fell 7 basis points after threatening earlier in the week to break out to new highs.
What To Look For This Week:
With the presidential election seemingly behind us, equity markets will be focused on trends in coronavirus cases and deaths as well as vaccine developments. There will be a lot of economic data released during the holiday shortened week including data on inflation, personal consumption, and home sales. Finally, the Federal Reserve will release the minutes from its November meeting which traders will scrutinize for any hint of future interest rate policy changes.
Thank you for being part of the Value Monitoring, Inc. family. Have a great holiday!
Jim, Mark, and Dave
P.S. To speak with a financial advisor, or to schedule a time to speak with us, visit www.ValueMonitoring.com/welcome.