Today, I'd like to provide an update on the coronavirus, including the economic and market implications. On the medical front, the holiday infection surges have faded. Case growth remains high, but we saw improvements in positive testing rates, as well as a decline in hospitalizations. Absent a sudden appearance of the more infectious strain of the virus, we are likely to see more progress in the next couple of weeks as vaccine deployment accelerates.

For the first time in quite a while, the big picture is positive. On the medical front, the post-Christmas/New Year travel surge has faded, testing has resumed at scale, and the positive test rates have dropped back down. The trends are now positive and likely to remain that way.

It seems appropriate today to consider how we think about politics when we look at our investments. With one administration ending and another starting, politics has obviously consumed much of everyone’s thoughts in the past weeks and months. With the outcome of the election, many are worried—and many are excited. With a new set of policies and priorities, we can reasonably expect the economy to change and the markets to react. Given the emotions that politics evokes, how do we think about politics as we make our investment decisions?

Last week was packed with economic updates, with the reports showing mixed results. Disappointing initial unemployment claims and retail sales reports contrasted with a better-than-expected industrial production release. This week will be another busy one for updates, with a focus on housing data and the weekly initial jobless claims report.

The economic news has continued to soften in recent days. December saw layoffs go up and the number of jobs decline, and, this morning, the retail sales numbers dropped. Consumer confidence has gone down. Clearly, the economic headwinds from the pandemic are getting worse.

As expected, we saw infections due to holiday travel showing up in the data over the past week, with case counts rising to new highs. But by week’s end, there were signs that case growth was peaking as the holiday travel effects started to fade. We could now be approaching the peak, although the events in Washington on January 6 are now presenting a risk of another wave of travel-induced infections. We should know in the next week or so if that is the case.

My colleague Sam Millette, senior investment research analyst on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Market Risk Update. Thanks for the assist, Sam!!

Markets continued to rally into the end of the year, with strong December results wrapping up a solid year for equities. The S&P 500 gained 3.17 percent during the month as the Dow Jones Industrial Average gained 3.41 percent and the Nasdaq Composite rose by 5.71 percent. Despite the strong returns in December to cap off the year, markets still face very real risks.