MARKET RECAP
Stocks were down by 0.69% in the US and 0.42% outside the US. Stimulus talks, which are on a constant stop and go, were in stop mode most of the week so that hurt stocks. Plus, the virus has been ramping up significantly since Thanksgiving and that is raising concerns of more restrictions on economic activity. As an example, indoor dining in New York was halted.
Despite the slight decline in the overall US market, the IPO’s were flying high, bringING back memories of 1999. DoorDash was up 86% and Airbnb 113% on their first day of trading.
Another sign signaling overvaluation, US investment-grade corporate bonds now yield less expected inflation. As of last Friday, the expected inflation rate over the next decade was measured at 1.89% (the difference between nominal and inflation-adjusted yields on 10-year US bonds), greater than the 1.85% yield on investment-grade corporates. This is the first time that has happened and it is mainly driven by negative real yields on US Treasury’s pushing investors up the risk scale, such as into these bonds, thereby pushing their yields down.
The European Central Bank ramped up its bond-buying program by more than a third and will introduce new low-cost loans for banks, in an effort to help governments and businesses as they fight through the current tidal wave of the virus. With this effort, the ECB has now poured in $3.62 trillion into the eurozone economy.
Unemployment claims jumped significantly higher, up by 137,000 to 853,000, last week. Consumer spending was up in October for the sixth straight month, according to the Commerce Department. And the Institue for Supply Management reported that the manufacturing and services sectors expanded in November.
The government reported a record deficit for the first two months of the fiscal year, up 25% from last year to $429 billion. Federal spending was up by 9% while revenue was down by 3%.
Net worth of U.S. households hit a record, a Federal Reserve report showed. Most of the benefit has gone to wealthier Americans who are invested in equities.
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