December 11, 2020
Chief Economist Scott Brown discusses the latest market data.
Jobless claims jumped to 853,000 in the week ending December 5 (from 716,000 in the previous week). Claims are choppy around major holidays, but this latest increase could reflect the impact of the current surge in COVID-19 cases (look for confirmation in the December 17 release). Claims have been distorted throughout the pandemic, reflecting repeat filings and some degree of fraud. The total number of individuals receiving some kind of unemployment benefit was 19.0 million in the week ending November 21 (in the employment report, the number officially “unemployed” was 6.7 million).
The Consumer Price Index (CPI) rose 0.2% in November (+1.2% y/y), also up 0.2% excluding food and energy (+1.6% y/y). Note that the price of the home does not factor into the shelter component of the CPI. The Bureau of Labor Statistics seeks to measure the cost of the service that housing provides, not the asset value, and so considers the rental equivalent for homeowners. Homeowners’ equivalent rent (24% of the overall CPI and 30% of the core CPI) rose 2.3% over the last 12 months (vs. 3.3% in the 12 months before that). Ex-food, energy and shelter, the CPI rose 1.4% in the 12 months ending in November (vs. 1.6% over the 12 months ending November 2019).
Next week, the Federal Open Market Committee is expected to leave short-term interest rates unchanged. The Summary of Economic Projections will include new graphs on senior Fed officials’ assessments of risk and uncertainty. In the September dot plot, most officials expected the federal funds rate to remain near 0% through 2023. Will the news on vaccines change that? Perhaps, but probably not a lot. In his press conference, Chair Powell is likely to plead further for fiscal support. Retail sales are expected to have risen modestly in November (unit vehicle sales fell and gasoline prices dipped), but seasonal adjustment could magnify the effects of the pandemic.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.3295||1.320|
|Dollars per Euro||1.2138||1.2113|
|Japanese Yen per Dollar||104.24||108.56|
|Canadian Dollars per Dollar||1.274||1.317|
|Mexican Peso per Dollar||20.012||19.118|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||1.08||1.31|
Treasury Yield Curve – 12/11/2020
As of close of business 12/10/2020
S&P Sector Performance (YTD) – 12/11/2020
|December 15||—||Industrial Production (November)|
|December 16||—||Retail Sales (November)|
|—||Homebuilder Sentiment (December)|
|—||FOMC Policy Decision|
|—||Fed Summary of Economic Projections|
|—||Powell Press Conference|
|December 17||—||Jobless Claims (week ending December 12)|
|—||Building Permits, Housing Starts (November)|
|December 18||—||Index of Leading Economic Indicators (November)|
|December 25||—||Christmas (markets closed)|
|January 1||—||New Year’s Day (markets closed)|
|January 5||—||Georgia Runoff Elections|
|January 8||—||Employment Report (December)|
All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.
The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor’s returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business December 10, 2020.
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