Election Day Tuesday. Fed meeting Thursday. Payrolls Friday. It was a busy week last week. As expected, election results were not immediately following Election Day due to the complications of voting during a pandemic and the tabulation of mail-in votes. But on Saturday most news sources were calling the race for Joe Biden although President Trump has yet to concede and has filed lawsuits in several states to contest the results. Democrats lost seats in the House but gained in the Senate, with the final Senate split to be determined on January 5th 2021 in the two runoff elections in Georgia. Georgia law mandates at 50% majority for a candidate to have the seat and that did not happen because of votes for third party candidates. The FOMC meeting was uneventful and the Fed reiterated the path of the economy is dependent on the course of the virus. The course of the virus has only worsened since last week. The UK is on a 30-day lockdown with France and Germany adding more restrictions over the last week. Covid cases and related deaths continue to climb in the US as we surpassed 10million cases on Monday and over 237,000 deaths. The October unemployment rate dropped from 7.9% to 6.9% and while positive news, as Covid cases have escalated in the US in recent weeks the service sector will be impacted yet again especially heading into winter months. In surprising news this morning, results from a large coronavirus vaccine study were announced, with the shot preventing over 90% of infections. The news prompted a huge equity rally and bond market sell-off with the 10yr UST yield touching 1.0% for the first time since March.
After a historic U.S. Presidential election, the outcome still remains uncertain although a Biden presidency looking imminent. Last Friday’s economic data was stronger than forecasted with payrolls remaining steady and the unemployment rate dropping to 6.9%. Covid-19 continues to weigh on some of the positive election results as the second wave continues to hit European countries aggressively.
Additional action by major European central banks could see additional easing policy in the coming months. The US dollar is marginally weaker to begin the week as the trend continue with the market pricing in a Biden win. Breaking news that Pfizer vaccine is 90% effective in the trial period has added momentum to the weaker dollar trend as equities are slated for a strong day as pre-markets are up 4-5%. BREXIT continues to face challenges between the UK and the EU but continued optimism has strengthened the British pound over the past few weeks.
Last week saw the largest weekly rally since the recovery rally back in March. The move was fueled by optimism on a Biden victory coupled with a likely Republican Senate, a political environment traditionally viewed as stable for the markets. This coupled with hopes of Biden bringing more stimulus and a better trade relationship with China drove the markets higher. NASDAQ led the way, with a 9.05% gain. S&P and DJI were up 7.36% and 6.89% respectively. All 11 GICS sectors were up with Tech (12.6%), Communication Services (8.48%) and Health Care (8.13%) leading the way. Energy (0.7%) and Utilities (2.8%) were the main laggards.
Growth had a strong week outperforming Value 9.0% vs 5.48%. The VIX also reflected the abatement of fear and uncertainty as it retreated to the low 20s. This week look for more of the same as futures are reflecting another strong open on reports of a Pfizer vaccine have a 90% effective rate of 90%.
As we approach the end of the year, let’s review the contribution limits for retirement plans whose tax years coincide with the end of the calendar year. With just under eight weeks left in the year, it may not be too late to adjust your contribution rate if you would like to catch up on maxing out your contribution.
The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is $19,500. The catch-up contribution limit for employees aged 50 and over who participate in these plans is $6,500. The limitation regarding SIMPLE retirement plans for 2020 is $13,500.
It’s important to note that contributions to IRAs, Roth IRAs, and SEP IRAs coincide with your tax filing date.
Last Week's Economic Data for 11/9
|Last Week's Economic Data||Actual||Survey|
|Construction Spending MoM||0.3%||1.0%|
|Durable Goods Orders||1.9%||1.9%|
|FOMC Rate Decision (Upper Bound)||0.25%||0.25%|
|Change in Nonfarm Payrolls||638k||580k|
|Wholesale Inventories MoM||0.4%||-0.1%|
This Week's Economic Data for 11/9
|This Week's Economic Data||Release Date||Survey|
|Initial Jobless Claims||11/12/2020||732k|
|PPI Final Demand MoM||11/13/2020||0.2%|
Market Data for 11/9
|1 Month Libor||0.13%||(1.1 bp)||(1.5 bp)||(162.9 bp)|
|3 Month Libor||0.21%||(1.5 bp)||(1.9 bp)||(169.6 bp)|
|6 Month Libor||0.24%||(0.4 bp)||(0.4 bp)||(168.1 bp)|
|12 Month Libor||0.33%||+0.0 bp||(1.5 bp)||(166.7 bp)|
|Fed Funds Effective||0.09%||(146.0 bp)|
|SOFR||0.10%||+0.0 bp||(147.0 bp)|
|US Treasury Yields||Current||WoW||MoM||YoY|
|12-Month||0.12%||+0.5 bp||(0.5 bp)||(145.2 bp)|
|2-Year||0.18%||+2.6 bp||+2.8 bp||(149.4 bp)|
|3-Year||0.24%||+4.6 bp||+4.2 bp||(146.2 bp)|
|5-Year||0.44%||+6.4 bp||+10.2 bp||(130.6 bp)|
|7-Year||0.70%||+7.4 bp||+14.9 bp||(116.0 bp)|
|10-Year||0.94%||+2.6 bp||+2.8 bp||(149.4 bp)|
|30-Year||1.74%||+2.6 bp||+2.8 bp||(149.4 bp)|
|US Swap Rates vs 3ML||Current||WoW||MoM||YoY|
|12-Month||0.21%||+0.0 bp||(0.8 bp)||(157.5 bp)|
|2-Year||0.26%||+2.0 bp||+1.6 bp||(146.5 bp)|
|3-Year||0.31%||+3.5 bp||+3.4 bp||(139.5 bp)|
|5-Year||0.50%||+6.4 bp||+8.3 bp||(122.6 bp)|
|7-Year||0.70%||+8.3 bp||+12.2 bp||(106.4 bp)|
|10-Year||0.96%||+10.3 bp||+14.8 bp||(89.2 bp)|
|30-Year||1.40%||+13.9 bp||+16.9 bp||(63.7 bp)|
|US Swap Spreads||Current||WoW||MoM||YoY|
|12-Month||+9 bp||(0.5 bp)||(0.3 bp)||(12.3 bp)|
|2-Year||+8 bp||(0.6 bp)||(1.1 bp)||+2.9 bp|
|3-Year||+7 bp||(1.1 bp)||(0.8 bp)||+6.8 bp|
|5-Year||+6 bp||(0.1 bp)||(1.9 bp)||+8.1 bp|
|7-Year||+1 bp||+0.9 bp||(2.7 bp)||+9.6 bp|
|10-Year||+1 bp||+7.7 bp||+12.0 bp||+60.2 bp|
|30-Year||(34 bp)||+11.3 bp||+14.1 bp||+85.7 bp|
|Japanese Yen||105.4400||(0.7 %)||+0.2%||+3.4%|
|Swiss Franc||0.9124||+0.7%||(0.2 %)||+8.9%|
|Gold||1,865||(1.6 %)||(3.4 %)||+27.9%|
|Silver||24||(0.4 %)||(4.6 %)||+42.7%|
|Crude Oil||40||+9.4%||(0.8 %)||(29.6 %)|
Source: Bloomberg L.P.
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