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Financial markets remain focused on 2021 rate of change recovery.

 

We have been reiterating that investors and market prices continue to focus on the pending recovery in economic and corporate earnings growth in 2021 and have been looking past any weakness in Q4 2020 and early 2021 data.  Last week was an example of this.  The economic data that was released showed a slowing in the Markit Services PMI and the ADP and Nonfarm Payroll report showed a decline in employment for the month of December.  On Wednesday of last week, the capital building was breached by a group of protestors and the approval of the electoral college was delayed until later that evening.  Despite the weakness in some year-end economic activity and another display of social and political unease, several market-based indicators continued to show that investors are not going to change their positioning until there is evidence that the recovery is going to be meaningfully delayed and there are risks that 2021 data could end up worse than 2020 data.  Without a complete lockdown of the economy again, there is a low probability of that occurring.  Below are several charts from last week showing that risk assets like the S&P 500, Russell 2000, Oil, and High Yield continued to perform positively, while gold declined, 10-year Treasury yields increased, and the U.S. dollar ($US) increased modestly.  The CBOE Volatility Index (VIX) also continued to decline last week.

Source: Koyfin.

Source: Koyfin.

Source: Koyfin.

Source: Koyfin.

Source: Koyfin.

 

Source: Koyfin.

Source: Koyfin.

Source: Koyfin.

 

As long as the expectations for 2021 remain positive on a rate of change basis compared to 2020, investors are likely going to be unphased by current events and weakening data from the November to January period. 

 



 

The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance.  The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.