By: Ariel Segal
The first Nonfarm payrolls decrease since April was reported last week on Friday. The restaurants and hospitality industry took on the majority of the job losses, while retail, construction/manufacturing, and professional services all posted solid gains.
After the payrolls report, President-elect Joe Biden called for trillions of dollars in immediate further support. Biden’s goals for this package include increasing direct payments to $2,000 and support for state and local authorities.
House Speaker Nancy Pelosi said that the House would take up a resolution to impeach Trump unless VP Mike Pence would remove Trump from office through the use of the 25th Amendment. However, a trial would delay Biden’s agenda as he takes office.
There has been an average of about 255k new cases per day of Covid-19 in the U.S during the past week. Pfizer and BioNTech raised their vaccine production target to 2 billion shots this year. The previous 2021 target was 1.3 billion doses. There have been more than 25 million shots given worldwide thus far.
Fixed Income Market:
By Joseph Colleran
After taking a week off for the holidays, the bond credit markets have resumed tightening. IG spreads have tightened by an average of 5 basis points versus USTs and HY levels are about a point higher in price. This is in line with the overall “risk on” trade that has been embraced by almost all asset classes in the wake of the Democrat’s sweep of the Georgia Senate runoff races. This is a broad based rally as volumes in both HG and HY have jumped from the anemic levels we saw over the holidays. Specific to LISI retail clients, we are also seeing continued strong interest in new issue Structured Notes – that interest has been equally split between single name equities and index linked securities. In municipal bonds we are not seeing much retail participation; however, those spreads are also grinding tighter.
Lipper Fund flow data for the week showed:
Domestic Equity Funds down $4.9.0 BLN
IG Bond Funds up $5.3 BLN
HY Bond Funds down $0.2BLN
Municipal Bond Funds up $0.9 BLN
Domestic Equity Funds down $2.0 BLN
IG Bond Funds up $5.9 BLN
HY Bond Funds up $1.7 BLN
Municipal Bond Funds up $1.5 BLN
By: James Zurovchak
Markets started the year off with solid gains for the first week. All three major indices finished in the green with NASDAQ up 2.5%, S&P up 1.9% and DJI gaining 1.7%. The move was fairly broad with 8 of 11 GICS sectors up on the week. Energy was again the leader with a gain 9.3%. Materials (+5.7%), Technology (+5.5%), Consumer Discretionary (+5.0%) and Financials (+4.9%) outperformed as well. Real Estate (-2.5%), Consumer Staples (-0.8%) and Utilities (-0.6%) were the worst performers. Last week Value Outpaced Growth +2.9% vs +1.2%. Small Caps continued their march higher, up +5.9% on the week. The action in the markets was driven mostly by the GA senate races going to the Democrats giving them a majority in the Senate. Consensus seems to be that the result is more stimulus and higher inflation causing a steepening of the yield curve and a quicker economic recovery. It remains to be seen whether this is a short move up in energy and financials or whether a more pronounced rotation into these sectors will occur.
By Anthony Minardo
Has the weak dollar trend finally run out of steam? Is this the start of a major reversal in the dollar? These are the questions the markets are asking themselves as we begin the second week of trading in 2021. The market continues to digest an abundance of market news which has temporarily boosted the US dollar. The possibility of another round of meaningful stimulus is likely after the democrats claimed victory in the Georgia state runoffs. This could very well ignite inflation and growth and allow the Fed to come into the picture sooner than later. We are seeing a reaction to this scenario through the 10-year treasury, as it has now pushed through 1%. The current dollar strength could be a correction, as we have been trending lower for 9 months, or will it be the start of the new 2021 trend. We will have to wait and see. Have a great week trading.
By Brian Stigliano
Estate Planning Strategies
With the Georgia runoff elections resulting in Democrats holding two more Senate seats, there is a much clearer path to significant estate tax changes for high-net-worth and ultra-high-net-worth families. Therefore, it may be a great time to take advantage of low interest rates, volatile markets, and a high federal estate tax exemption to more efficiently transfer wealth to future generations. A few common strategies to consider are below, but best practice is to engage with a CFP® professional and an estate planning attorney.
Use of irrevocable trusts:
- Grantor Retained Annuity Trust – used to gift an asset to the trust but maintain an income stream from it
- Intentionally Defective Grantor Trust – used to freeze the value of certain assets to potentially reduce the size of an estate
- Qualified Personal Residence Trust – used to remove the value of a residence from an estate while maintaining use of the residence
- Charitable Remainder Trust – used to gift an asset to a charity but maintain an income stream from it
- Irrevocable Life Insurance Trust – used to remove the death benefit proceeds from the value of an estate
You can create a Family Limited Partnership (FLP) to maintain control of the business interests
You can gift $15,000 per year to as many people as you like without paying a gift tax or using your lifetime exclusion
You can pay an unlimited amount of one’s education or medical expense in any given year as long as the institution is paid directly.
Last Week's Economic Data for 11/11
|Last Week's Economic Data||Actual||Survey|
|ADP Employment Change||-123k||75k|
|Durable Goods Orders||1.0%||0.9%|
|Initial Jobless Claims||787k||800k|
|Change in Nonfarm Payrolls||-140k||50k|
|Wholesale Inventories MoM||0.0%||-0.1%|
This Week's Economic Data for 1/11
|This Week's Economic Data||Release Date||Survey|
|Initial Jobless Claims||1/14/21||790k|
|PPI Final Demand MoM||1/15/21||0.4%|
|Retail Sales Advance MoM||1/15/21||0.0%|
Market Data for 1/11
|1 Month Libor||0.13%||(1.4 bp)||(3.3 bp)||(155.1 bp)|
|3 Month Libor||0.22%||(1.3 bp)||+0.8 bp||(161.3 bp)|
|6 Month Libor||0.25%||(0.6 bp)||+0.2 bp||(162.2 bp)|
|12 Month Libor||0.33%||(1.4 bp)||(0.9 bp)||(164.0 bp)|
|Fed Funds Effective||0.09%||(146.0 bp)|
|SOFR||0.09%||+0.0 bp||+2.0 bp||(146.0 bp)|
|US Treasury Yields||Current||WoW||MoM||YoY|
|12-Month||0.10%||+0.3 bp||+1.8 bp||(142.0 bp)|
|2-Year||0.14%||+3.2 bp||+3.0 bp||(142.5 bp)|
|3-Year||0.22%||+6.7 bp||+5.0 bp||(135.9 bp)|
|5-Year||0.51%||+15.6 bp||+14.0 bp||(112.6 bp)|
|7-Year||0.84%||+21.1 bp||+21.5 bp||(89.8 bp)|
|10-Year||1.15%||+3.2 bp||+3.0 bp||(142.5 bp)|
|30-Year||1.88%||+3.2 bp||+3.0 bp||(142.5 bp)|
|US Swap Rates vs 3ML||Current||WoW||MoM||YoY|
|12-Month||0.20%||+1.1 bp||+1.3 bp||(153.3 bp)|
|2-Year||0.22%||+2.5 bp||+2.2 bp||(142.5 bp)|
|3-Year||0.30%||+5.7 bp||+5.8 bp||(132.4 bp)|
|5-Year||0.58%||+13.6 bp||+15.6 bp||(106.8 bp)|
|7-Year||0.85%||+17.9 bp||+21.8 bp||(84.7 bp)|
|10-Year||1.15%||+20.0 bp||+25.4 bp||(64.2 bp)|
|30-Year||1.63%||+17.9 bp||+26.8 bp||(35.7 bp)|
|US Swap Spreads||Current||WoW||MoM||YoY|
|12-Month||+10 bp||+0.8 bp||(0.4 bp)||(11.3 bp)|
|2-Year||+7 bp||(0.7 bp)||(0.8 bp)|
|3-Year||+7 bp||(1.0 bp)||+0.8 bp||+3.4 bp|
|5-Year||+7 bp||(2.0 bp)||+1.6 bp||+5.8 bp|
|7-Year||+1 bp||(3.2 bp)||+0.3 bp||+5.1 bp|
|10-Year||+1 bp||+16.8 bp||+22.4 bp||+78.3 bp|
|30-Year||(26 bp)||+14.7 bp||+23.8 bp||+106.8 bp|
|Dow Jones||31,009||(0.3 %)||+3.2%||+7.6%|
|S&P 500||3,800||(0.7 %)||+3.7%||+16.4%|
|Japanese Yen||104.2300||(1.4 %)||(0.2 %)||+5.5%|
|British Pound||1.3513||(0.8 %)||+1.4%||+4.0%|
|Canadian Dollar||1.2784||(0.9 %)||(0.2 %)||+2.1%|
|Australian Dollar||0.7697||(0.8 %)||+2.2%||+11.5%|
|Swiss Franc||0.8906||(1.4 %)||(0.4 %)||+9.0%|
|Crude Oil||52||+9.6%||+12.0%||(11.6 %)|
Source: Bloomberg L.P.
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