In just the past week two new vaccines have been announced with apparently high effectiveness against Covid-19. While encouraging, this news is contrasted with skyrocketing cases of the virus both nationally and internationally. Here is a summary of what we are seeing in the markets. While it seems that relief from the pandemic may finally be surfacing, it is clearly not here yet. Please keep safe and healthy.
What Happened Last Week:
Equity markets continued their strong run last week, extending their solid post-election gains. The large cap S&P 500 gained more than 2% and the small cap Russell 2000 gained a whopping 6%. The one notable exception was the tech heavy Nasdaq index which dropped significantly on Monday and Tuesday. It clawed back some of those losses later in the week, but still ended the seven day stretch lower by more than a percent.
US high yield corporate and municipal securities benefitted from strong equity markets, despite a rise in US Treasury interest rates. On Thursday, the US treasury’s 10 year note nearly touched its post pandemic high of 1% on signs of economic strength and fears of potential inflation but increasingly bad trends in coronavirus infections prevented the yield from breaking above 1%.
What To Look For This Week:
Third quarter earnings reports are largely behind us and the economic release calendar is fairly light. The largest drivers of both stock and bond prices next week are likely to be related to coronavirus news. Increasing infection rates, more restrictive lockdowns and social distancing measure will pressure markets. Good news on vaccines and hope for economic stimulus will tend to support them.
Jim, Mark, and Dave
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