Much like last week, the markets this week behaved in a bit of a bifurcated manner. Once again cyclical or economically sensitive areas of the market such as energy and financials, and the stocks of small companies or small caps, led the way as investors continued to price in a vaccine-driven economic recovery. The Democrats winning both Georgia Senate seats added fuel to the cyclical fire, as it increased the likelihood that an additional stimulus package may come to fruition and further boost the economy. Although cyclicals performed well, growth-oriented areas of the markets had a tougher time finding their footing. While last week’s technology struggles centered around concerns that regulatory risk may increase for the sector, this week the focus shifted to social media companies. After the horrific riots in Washington D.C. last week, social media giants such as Twitter and Facebook banned President Trump from using their services “due to the risk of further incitement of violence.” As such, the share prices of these companies sold off on concerns that President Trump’s followers may abandon these platforms. Investment grade bonds are also struggling so far this year. With the prospects of economic growth being reignited, the market is beginning to price in the potential for a pick-up in inflation. As such, long-term rates have begun to rise, which has caused a drag on high-quality bonds, whose prices tend to move inversely to interest rates. While this trend could continue to hamper the performance of some fixed- income vehicles, bonds, as a ballast to stocks, still have a place in many investment portfolios. Political unrest remains the topic du jour. In yet another historic event, the House of Representatives moved to impeach President Trump, formally charging the president with inciting insurrection. This is the first time in history that a standing president has been impeached twice. Regardless of political views, the past couple weeks have been disheartening to watch for many reasons. While it can be easy to feel overwhelmed by the moment, I am hopeful that this too shall pass. It may not happen overnight, but I believe the political climate will soften, and a sense of normalcy will return. Stay safe and be well. Market comments are based on indexes which are unmanaged and cannot be directly invested into. Past performance is no guarantee of future results. Investing involves risk and the potential to lose principal. The information provided, including references to individual companies are for general informational and educational purposes only and is not a recommendation of any kind or investment advice. and educational purposes only and is not a recommendation of any kind or investment advice. |
January 14 Weekly Market Update
