The Independent Market Observer

Is the Worst of the Economic Damage Behind Us?

January 29, 2021

For the moment at least, the big picture continues to be positive. On the medical front, all three major data series—new cases, positive testing rates, and hospitalizations—have continued to trend down, while vaccinations continue to scale up. If current trends continue, we are through the worst of the pandemic and should see continued improvement.

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Is Reddit Breaking the Market?

January 28, 2021

Another day, another crisis. On top of the bubble worries and the market pullback yesterday, the headlines are saying we now have a mob of retail traders coming for the market itself. By trading up several stocks well beyond what the professionals think they are worth, the headlines scream that the retail investors are beating Wall Street and that the market is somehow broken. I don’t think so.

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Is the Stock Market in a Bubble?

January 27, 2021

There has been a lot of talk about whether the stock market is in a bubble. As usual, there are distinguished professionals on both sides of the debate, armed with convincing statistics and arguments. So, what is the average investor to do? We do what we usually do: try to understand the facts of the situation. Let’s start by asking ourselves what a bubble is, as this is the unavoidable first step in deciding whether we are in one.

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2020’s Remarkable Value Rally

January 26, 2021

Today's post is from Peter Essele, vice president of investment management and research.

As we turn the page on 2020 (thankfully!), market practitioners are starting to release outlook pieces and portfolio positioning recommendations for the year ahead. The recent strong performance of value, when compared with growth, has many investors wondering whether it makes sense to consider an overweight to this seemingly forgotten asset class, which has benefited greatly from the recent vaccine rally.

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Monday Update: Housing Sector Continues to Shine

January 25, 2021

Last week was a busy time for economic updates, with a focus on the housing sector. The reports for this important sector of the economy largely pointed toward continued healthy levels of growth to end the year. This week will also be packed with updates, with the first look at fourth-quarter GDP growth and December’s personal spending and income reports serving as potential highlights.

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Coronavirus Update: January 22, 2021 [Video]

January 22, 2021

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.

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Progress on Medical Front, But Economic Data Remains Soft

January 21, 2021

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.

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How to Think About Politics and Investments

January 20, 2021

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?

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Monday Update (on Tuesday): Pandemic Slows Economic Recovery

January 19, 2021

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.

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The Biden Stimulus Plan

January 15, 2021

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.

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Financial Markets Hold Gains on Vaccine and Stimulus News

January 14, 2021

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.

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Monthly Market Risk Update: January 2021

January 13, 2021

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.

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Economic Risk Factor Update: January 2021

January 12, 2021

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

The economy showed further signs of slowing growth in December, with the third wave of the pandemic causing shutdowns that have hit employment. Job creation turned negative for the first time since April, as rising restrictions at the state and local level put increased stress on the labor market. The underlying data showed some signs for optimism, however, as all of the damage came from the leisure and hospitality sector, while other sectors showed surprising strength. Consumer confidence also fell during the month, but business confidence remained surprisingly resilient.

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Monday Update: Business Confidence Rises Unexpectedly

January 11, 2021

Last week saw a number of important economic data releases, with December’s business confidence and employment reports garnering the most attention. Business confidence unexpectedly improved during the month, although the economy suffered from a net loss of jobs for the first time since April. This week will be packed with updates, with a focus on December’s inflation and retail sales reports, as well as the first look at consumer confidence in January.

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Coronavirus Update: January 8, 2021 [Video]

January 8, 2021

Today, I'd like to provide an update on the coronavirus, including the economic and market implications. On the medical front, holiday travel effects have kept infection growth at high levels, and positive results also moved to new highs. Still, we should see vaccinations ramp up by the end of the month, and we could approach herd immunity as soon as June.

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Economy Hit Hard in Recent Weeks

January 7, 2021

As expected, we saw a pullback in many coronavirus indicators over the Christmas holidays. But also as expected, the data has bounced back, indicating that the drop was due to slower reporting rather than an actual decline in cases. Looking forward, we still have another couple of weeks where infections due to holiday travel will show up in the data, and there are signs that is starting to occur. The next two weeks are likely to show continued case growth. While some sections of the country are showing improvements, we are not through this wave yet.

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Washington Turns (Very Light) Blue

January 6, 2021

Today should be the day we see Washington start to turn blue. With the Congress meeting to count the inaugural votes and with the Georgia Senate runoff likely to show both seats won by Democrats, all three arms of government will be under control of the Democratic Party come the inauguration.

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Looking Back at the Markets in December 2020 and Ahead to January 2021

January 5, 2021

At the start of a new year, it makes sense to look back and see where we were, before looking ahead to where we are going. This year, doing this is especially important, given the significant changes we saw in December. But we start January in a very different place—a place with better news, better prospects, and lower risks.

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Market Thoughts for January 2021 [Video]

January 4, 2021

December was a great month for the markets, with gains across the board. Unfortunately, we saw rising economic damage. Job growth dropped, and layoffs rose. Consumer confidence and spending also declined as the medical risks drove governmental shutdowns. Still, business confidence and spending were solid, and December's federal stimulus bill should help revive consumer demand.

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Monday Update: Initial Jobless Claims Fall

January 4, 2021

Last week was quiet on the economic update front, with the weekly initial jobless claims report serving as the only major data release. The number of initial unemployment claims fell by more than expected, but the Christmas holiday may have led to some volatility in the reporting. This week will be a busier one for updates, with a look at December’s business confidence and employment reports serving as potential highlights.

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