Weekly Investment Strategy - Butler Financial, LTD


Weekly Investment Strategy

December 31, 2020

Key Takeaways

  • Vaccine News Was A ‘Gift’ To Countries Across The Globe
  • ‘Wishing’ For Unemployment To Fall To Pre-Pandemic Lows
  • Tech Outperformance Could ‘Light The Way’ For Equities

On Thanksgiving Day, we expressed gratitude for all of the gifts and blessings that investors have received from the US economy and the financial markets in the midst of this turbulent year. Between record setting monetary and fiscal stimulus action and equities notching post-COVID record highs on the heels of the quickest vaccine development in history, we had quite the list despite the chaotic impact that the pandemic has had on the global economy and the financial markets! With COVID-19 claiming the lives of nearly 1.8 million people worldwide and forcing many of our holiday gatherings to be held virtually, it has been more difficult than usual to embrace the holiday spirit. But if we truly allow ourselves to get caught up in the excitement of gift giving and gift receiving, we have a few ideas for what we hope to unwrap in 2021. No matter your reason for celebrating this holiday season, these are the presents we believe investors would be happy to receive in the new year:

  1. One Reliable Vaccine | We’ve been wishing for one reliable, widely available vaccine since the start of the pandemic earlier this year, knowing that the inoculation of a majority of our population would bring ‘joy to the world’ as we return to normality and reconnect with friends and family in-person once again. While there are multiple effective vaccines being disseminated at this time, we hope that additional vaccines will prove to be effective, that public trust regarding the vaccine remains intact, and that all production goals and distribution schedules are able to be satisfied.
  2. Two Parties Coming Together | A Phase 4 fiscal stimulus ‘gift’ was ‘delivered’ to the US economy before year end, but this wish for both political parties to put the health and prosperity of citizens and businesses ahead of partisan issues remains. The Georgia runoff elections may result in divided government (Democratic House, Republican Senate), and while this alleviates the concern of major policy shifts, it may lead to prolonged negotiations at a time the economic recovery needs the most assistance.
  3. Three Percent Mortgage Rates | Mortgage rates below 3% may have buyers ‘prancing’ to purchase a new ‘home for the holidays.’ The COVID-19 induced lockdowns sparked homeowners to revaluate their living space, whether it be refinancing their current home, completing necessary renovations, or purchasing a new home in the lower for longer interest rate environment.
  4. Four Percent Unemployment | The COVID-19 pandemic caused the unemployment rate to spike from a 50-year low of 3.5% to a record high 14.7%. The unemployment rate falling back toward the 4% threshold should be achievable if the economy is able to fully, sustainably reopen, which would surely make the labor market’s ‘spirits bright.’
  5. Five Golden Rings | The weather outside may be frightful, but receiving five golden rings would be so delightful. This pricey present is even more valuable given that gold prices have rallied more than 24% this year.
  6. Six Percent Increase In Personal Consumption | With personal consumption accounting for ~70% of the US economy, a 6% increase in consumer spending would bring ‘good tidings’ to GDP and bolster the strength of the economic recovery.
  7. Seven Continents With Positive GDP Growth | Seven continents with positive GDP growth would help the global economy rebound ‘up, up, and away’ from the severely depressed levels caused by the pandemic.
  8. Eighth Year Of Tech Outperformance | The eighth year of ‘hot’ Tech sector outperformance would ‘light the way’ for the equity markets, so we have to ‘believe’ in the ‘magic’ of long-term growth catalysts like 5G!
  9. Nine Handle For Investment-Grade Spreads | The nine handle on investment-grade spreads would have them ‘jingle all the way’ back below pre-pandemic lows. Record setting intervention by the Fed has helped spreads decline from the March peak.
  10. Ten Percent Price Return For The S&P 500 | A 10% price return for the S&P 500 would keep US stocks ‘dashing’ to new record highs. The full economic recovery expected by the end of 2021 may help this big ‘wish’ come true.
  11. All Eleven S&P 500 Sectors Posting Positive Performance | All eleven S&P 500 sectors with ‘piping’ performance would have investors ‘rocking around’ the recovery rally. We hope that the economic recovery will be supportive of all sectors and industries.
  12. Twelve Months Of Positive Payrolls | A year of positive job creation would have the recovery bells ‘ringing’ and the carolers ‘singing.’ Twelve months of positive payrolls is just what the labor market needs to reduce the unemployment rate back to pre- pandemic levels. Job creation would also lead to more robust consumer spending!

While we would love for investors to receive all of the gifts on our holiday wish list, even a few could result in 2021 being a better, brighter year. But in addition to our hopes for the US economy and financial markets, we want to send our best wishes for a new year of health, happiness, and good fortune to you and your families.

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All expressions of opinion reflect the judgment of Raymond James & Associates, Inc., and are subject to change. Information has been obtained from sources considered reliable, but we do not guarantee that the material presented is accurate or that it provides a complete description of the securities, markets or developments mentioned. There is no assurance any of the trends mentioned will continue or that any of the forecasts mentioned will occur. Economic and market conditions are subject to change. Investing involves risk including the possible loss of capital. International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets. Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. Past performance may not be indicative of future results.

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