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Weekly Market Commentary, February 8, 2021

The Markets
 
 
It’s not a black diamond ski run yet, but the yield curve for U.S. Treasuries is steeper than it has been in a while.
 
A yield curve is the line on a graph showing yields for different maturities of bonds. Yield curves provide insight to bond investors’ perceptions about the economy. There are four basic types of yield curves:
 
  • Normal: The slope is upward because short-term bond yields are lower than long-term bond yields. A normal curve for U.S. Treasuries has a yield gap of about 2.3 percent between 30-year Treasury bonds and 3-year Treasury bills, according to Fidelity. On Friday, the difference was 1.78 percent.
  • Steep. The upward curve is unusually steep. This may occur when an economic expansion is underway, demand for capital pushes interest rates higher, and inflation rises.
  • Flat: There is no curve because short- and long-term bonds have similar yields. Flattening yield curves can be a precursor of economic slowdown and lower interest rates.
  • Inverted: The curve slopes down. Long-term bond yields are lower than short-term bond yields. Some believe an inverted yield curve is a signal that recession is ahead.
 
Right now, the steepening of the U.S. Treasury yield curve is positive news, according to a source cited by Ben Levisohn of Barron’s:
 
“Historically, [a steepening yield curve is a] good sign for both the economy and
stock markets…But it is also an early warning sign that the clock is ticking on how
long the Fed will remain on hold, or easy, before beginning to hike rates and
tighten financial conditions to combat the threat of runaway inflation.”
 
Inflation concerns were part of last week’s debate over the size of the pending stimulus. If stimulus is too small, economic growth and jobs recovery may falter. If it’s too big, the economy may overheat and inflation could become an issue, according to economist Lawrence Summers in The Washington Post.
 
Judging by January’s anemic jobs report, it could be a while before the economy runs too hot.
 
The Bureau of Labor Statistics reported 49,000 jobs were created last month. At that rate, it would take a very long time for the economy to recover the jobs lost in 2020. The pace of hiring is expected to accelerate as more Americans get vaccinated and new stimulus is distributed, reported Matthew Klein of Barron’s.
 
Major U.S. stock indices finished the week higher.
 
 
 
Bits and Bobs. Investors are always looking for news that might lead them to new trends in the market. Here are a few fascinating tidbits from last week:
 
  • Currency competition. China would really like the yuan to replace the U.S. dollar as the world’s favored currency. Reuters reported, “…the global system for financial messaging and cross-border payments, has set up a joint venture with the Chinese central bank’s digital currency research institute and clearing centre, a move some see as a sign that China wants to explore global use of its planned digital yuan.”
 
  • Putting a price tag on nature. The Treasury of the United Kingdom commissioned an expert panel to evaluate the contributions of species and ecosystems to the size and growth of economies and evaluate how loss of biodiversity will affect economies in the future. The 600-page Dasgupta Review reports that sustaining the world’s current level of economic growth and standards of living (a.k.a. “global demand for the biosphere’s goods and services and the biosphere’s current capacity to supply them on a sustainable basis”) will require 1.6 Earths.
 
  • Veggies telling tales. Scientists are finding ways to help plants monitor the environment and communicate their findings. Researchers at the Massachusetts Institute of Technology (MIT) embedded nanotubes in spinach plants to look for chemical compounds found in explosives, like landmines. MIT News explained, “When one of these chemicals is present in the groundwater sampled naturally by the plant, carbon nanotubes embedded in the plant leaves emit a fluorescent signal that can be read with an infrared camera. The camera can be attached to a small computer similar to a smartphone, which then sends an email to the user.”
 
Weekly Focus – Think About It
 
“Here's to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently…Because they change things. They push the human race forward. And, while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do.”
--Rob Siltanen, Advertising marketer
 
 
 
Best regards,
 
Lee Barczak
President
 
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor's 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision.
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Weekly Market Commentary, February 2, 2021

The Markets
 
They say people watching the same event often see different things. That seems to have been the case last week when share prices of a few companies experienced tremendous volatility.
 
Some cast the events as a David vs. Goliath morality tale, however, Michael Mackenzie of Financial Times saw it differently. He wrote, “…a speculative surge from retail investors using borrowed money…has in the past signaled a frothy market top.” (In financial lingo, a market is ‘frothy’ when investors drive asset prices higher while ignoring underlying fundamentals.)
 
No matter how you characterize it, the events of last week were unusual. Felix Salmon of Axios explained, “Almost never does a stock trade more than twice its market value in a single day…It has happened 7 times this week already, and 20 times this month…What we've seen in the past month, and especially the past week, is certain companies becoming little more than vehicles for short-term gambling.”
 
While the social-media-driven trading spectacle was fascinating, it overshadowed other substantive news that may affect more companies over a longer period of time:
 
  •  The Federal Reserve left interest rates unchanged near zero. Fed Chair Jerome Powell indicated rates will remain low until jobs have recovered, even if inflation moves beyond the Fed’s target rate, reported Joy Wiltermuth and Andrea Riquier of MarketWatch.
 
  • The economy continued to grow during the fourth quarter of 2020. The Bureau of Economic Analysis reported gross domestic product (GDP), which is the value of all goods and services produced, increased from the third to the fourth quarter of 2020. The pace of growth slowed significantly from the third quarter as the coronavirus continued to interfere with economic activity.
 
  •   A highly anticipated vaccine proved less effective than anticipated. Markets responded negatively to the news that a single-shot vaccine was 66 percent effective globally. The value of the vaccine is greater than the statistic suggests, according to experts cited by Ben Levisohn of Barron’s. The shot, “…prevented severe symptoms in 85 percent of patients, meaning that even those who caught the virus had cough, sniffles, and fevers but avoided the worst outcomes…”
 
  •  Company earnings in the fourth quarter were better-than-expected. On Friday, John Butters of FactSet wrote, “Overall, 37 percent of the companies in the S&P 500 have reported actual results for Q4 2020 to date. Of these companies, 82 percent have reported actual EPS [earnings-per-share] above estimates…”
 
Last week, major U.S. stock market indices finished lower.
 
 
What’s new? In January, the Merriam Webster Dictionary added 520 words to its pages. The additions include new words that have found their way into common use, as well as expanded definitions for words that were already well-established. Here is a sampling of the new entries:
 
  • Hygge: A cozy quality that makes a person feel content and comfortable
 
  •  Pod: A small group of people who interact closely while minimizing outside contact to avoid exposure to a contagious disease
 
  • Hard pass: A firm refusal or rejection
 
  • Cancel culture: The practice of engaging in mass canceling as a way of expressing disapproval and applying social pressure
 
  • Crowdfunding: Obtaining needed funding by asking a large number of people, usually members of an online community, for contributions
 
  • Gig worker: A person who works temporary jobs as an independent contractor or freelancer
 
  • Second gentleman: The husband or male partner of a vice president or second in command of a country or jurisdiction
 
As new words become common or expand their meanings, other words become obsolete. What are some words that explained the world when you were younger and have fallen out of use? Britches, floppy disk, icebox, and yuppie come to mind.
 
Weekly Focus – Think About It
 
“For last year's words belong to last year's language
And next year's words await another voice.”
--T.S. Eliot, Poet, editor, playwright
 
Best regards,
 
 
Lee Barczak
President
 
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor's 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision.
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Weekly Market Commentary, January 26, 2021

The Markets
 
Last week, as COVID-19 vaccination efforts continued, there was speculation about stock market corrections and asset bubbles.
 
On Sunday morning, Bloomberg reported 63 million doses of the coronavirus vaccine had been administered across 56 countries. In the United States, 21.1 million shots have been delivered – about 51 percent of the vaccinations that were sent to states. At that point, the pace of vaccination in the United States was just over one million doses a day.
 
Improvements in the pace of vaccinations could lift market optimism, according to Ben Levisohn of Barron’s, but a market correction is still a possibility:
 
“…the S&P 500 has been following a pattern typical of recessions since 1990, one
that sees the recovery occur in three phases: an initial recovery, a period of consolidation, and a second rebound. The initial recovery has lasted an average of 10 months, with an average return of 48 percent. That was followed by a period of consolidation that lasted from two to seven months and saw stocks sink an average of 17 percent. That was then followed by another rally…The current bounce from the March lows has lasted about 10 months and produced gains of just over 71 percent. If the market follows the historical pattern, it should pull back by spring – but that will be a buying opportunity.”
 
A survey from Deutsche Bank sparked talk about the possibility of asset bubbles. In a CNBC interview, Jim Reid, who heads global credit strategy at Deutsche Bank, shared results of the company’s January survey. Of the 627 market professionals who participated, the vast majority of respondents (89 percent) saw some asset bubbles in markets. Reid explained central bank policies and stay-at-home trading were responsible, in part, for rising asset prices.
 
Solid fourth quarter 2020 earnings may be supporting asset prices, too. So far, 13 percent of companies in the Standard & Poor’s 500 Index have reported results. John Butters of FactSet wrote, “At this point in time, more S&P 500 companies are beating EPS [earnings-per-share] estimates for the fourth quarter than average, and beating EPS estimates by a wider margin than average.”
 
Last week, major U.S. stock indices moved higher. The Nasdaq Composite gained 4.2 percent, which was its biggest gain since November 2020.
 
How important is financial literacy? At the end of 2020, the FINRA Investor Education Foundation published a report that found, “…financial literacy has significant predictive power for future financial outcomes, even after controlling for baseline financial characteristics and a wide set of demographic and individual characteristics that influence financial decision making.”
 
In fact, financial literacy may be more important today than it has ever been. That’s because the responsibility for saving, investing, and generating income for retirement has shifted from companies (that managed defined benefit plan assets) to individuals (who manage 401(k), 403(b), and other defined contribution plan assets).
 
The researchers administered a quiz at the beginning and end of the research period (six years). The quiz included questions that were a lot like these, which are derived from questions asked by the National Financial Capability Study:
 
1.   Suppose you have $100 in a savings account and it is earning 2 percent a year. After five years, how much money will be in the account?
a.   More than $102
b.   Exactly $102
c.    Less than $102
d.   I don’t know
 
2.   Now, suppose the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, will the money in the account buy more than it does today, exactly the same as it does today, or less than it does today?
a.   More
b.   Same
c.    Less
d.   I don’t know
 
3.   When interest rates increase, what typically happens to bond prices? Do they rise, fall, or stay the same? Or is there no relationship between interest rates and bond prices?
a.   Rise
b.   Fall
c.    Stay the same
d.   No relationship
e.   I don’t know
 
4.   Suppose you owe $1,000 on a loan and the interest rate you are paying is 20 percent per year, compounded annually. If you don't pay anything on the loan, how many years will it take for the amount you owe to double?
a.   Less than two years
b.   Two to four years
c.    Five to nine years
d.   Ten or more years
e.   I don’t know
 
If these answers generate questions for you, please give us a call.
 
Answers:
1.   A – More than $102.
2.   C – Less.
3.   B – Fall.
4.   B – Two to four years.
 
Weekly Focus – Think About It
 
“I was gratified to be able to answer promptly, and I did. I said I didn’t know.”
--Mark Twain, American writer, humorist, and lecturer
 
Best regards,
 
 
Lee Barczak
President
 
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor's 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision.
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Weekly Market Commentary, January 19, 2021

The Markets
 
Investors were rocked by economic data showing the economy hit the brakes hard in December.
 
Last week, major U.S. stock indices decelerated as investors gaped at the economic damage caused by the rising number of coronavirus cases around the world. There have been more than two million COVID-19 deaths globally, with more than 390,000 deaths in the United States. The spread has resulted in new lockdowns and restrictions and has hurt economic recovery.
 
Ben Levisohn of Barron’s reported:
 
“This past week – with the market looking ahead to the inauguration and what might
be in store following the Capitol riots and Donald Trump’s second impeachment –
was a terrible one for economic data. Whether it was small-business confidence,
consumer inflation, or just about anything else, the numbers painted a picture of an
economy that was slowing more rapidly than expected. Initial jobless claims, which
spiked to their highest level since August, and retail sales, which fell 0.7 percent,
were particularly frightening.”
 
On Thursday, President-elect Biden explained his $1.9 trillion economic relief package. The announcement of new stimulus didn’t move investors. That may be because the potential impact of a new stimulus plan has already been priced into markets, as has the new administration’s longer-term plans for infrastructure spending, reported Katherine Greifeld of Bloomberg. The relief package that passes Congress may be smaller – about $1.1 trillion, according to a Goldman Sachs economist cited by Randall Forsyth of Barron’s.
 
Investors are keeping an eye on inflation, which remains relatively low but has begun trending higher, according to Jeffry Bartash of MarketWatch. During the past few months, the core rate of inflation has remained below the Federal Reserve’s 2 percent target. However, inflation expectations and bond yields have been moving higher, reported Jonnelle Marte, Ann Saphir, and Howard Schneider of Reuters. As bonds provide more attractive returns, income investors may shift away from stocks and into less risky opportunities.
 
Last week, the Standard & Poor’s 500 Index lost more than 1 percent for the first time since October.
 
 
Trading teeth for treasure during the pandemic. Around the globe, the pandemic helped make 2020 one the most challenging years ever for dentists. The Dental Tribune reported most dental offices around the world closed their doors in March. While most eventually reopened, the impact on dental practices and suppliers was significant. Many adopted cost-cutting measures.
 
The Tooth Fairy did not suffer the same fate.
 
In August 2020, Delta Dental’s Original Tooth Fairy Poll® found, “…the Tooth Fairy’s average cash gift increased 30 cents for a lost tooth, for a total of $4.03 per tooth.” The value of a lost tooth has tripled since the poll began in 1998. (The Tooth Fairy exchange rate was about $1.30/tooth back then.)
 
Four dollars may seem steep, but the United States isn’t the only country where lost teeth command a high price. For example:
 
  • Japanese children receive ¥437.93 from the Tooth Fairy. That’s about $4.22.
  • Ireland and Spain, a baby tooth is worth €3.64 or $4.41.
  • Canadian kids receive $5.36 Canadian or $4.38 American.
  • Brazilian parents get off lighter. A tooth there is valued at R$17.12 or $3.27.
 
Visits from the Tooth Fairy offer teachable moments – times when kids may be interested in learning about money. One way to get the discussion going is to ask recipients of the Tooth Fairy’s generosity how they plan to spend the money. Once you’ve listened to the answer, you may want to offer other ideas like saving or donating part of the money. If you would like more ideas, let us know.
 
Weekly Focus – Think About It
 
“Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair.”
--Sam Ewing, Baseball player
 
Best regards,
 
Lee Barczak
President
 
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor's 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision.
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Weekly Market Commentary (December 28, 2020)

The Markets
 
U.S. stock markets remained calm as a fresh chapter opened in the coronavirus stimulus saga last week.
 
Congress managed to cobble together a new stimulus package that was acceptable to both sides and pass it. The proposed package included money to help states distribute vaccines, an unemployment benefits extension, $600 checks for eligible Americans, aid for airlines, and other provisions, reported Mike Calia of CNBC.
 
“…fiscal support is seen as critical to keep the economic recovery from faltering as coronavirus cases rise and cities consider new shutdowns. Consumer spending has flagged, and labor market gains have begun to stall. While the number of Americans applying for unemployment benefits declined last week, it still remains elevated compared with pre-COVID levels,” reported Colby Smith and Eric Platt of Financial Times.
 
President Trump disagreed with some provisions in the bill, reported Financial Times. Over the weekend, it was unclear whether he would sign it, veto it, or just hold it without taking action.
 
Since the $900 billion stimulus bill was attached to the $1.4 trillion government funding bill, the impact of a veto or inaction could be quite significant. “Without Trump’s signature, the government may partially shut down on Tuesday as funding runs out, though Congress could pass a stopgap measure,” reported Daren Fonda of Barron’s.
 
Stock investors appeared optimistic President Trump would sign the bill. News of a Brexit trade deal and a more contagious version of the virus in the United Kingdom had limited impact on U.S. markets.
 
All-in-all it was a quiet holiday week and major U.S. indices finished with mixed results. If the stimulus bill is not signed and a stopgap measure is not passed, markets could be volatile next week.
 

Data as of 12/24/20

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

-0.2%

14.6%

14.9%

11.4%

12.4%

11.4%

Dow Jones Global ex-U.S.

-0.7

7.4

7.9

2.4

6.0

2.6

10-year Treasury Note (Yield Only)

1.0

NA

1.9

2.5

2.2

3.4

Gold (per ounce)

-0.3

23.1

25.8

13.6

11.8

3.1

Bloomberg Commodity Index

-0.4

-4.8

-4.5

-3.9

-0.4

-7.0

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, MarketWatch, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

THERE WILL ALWAYS BE RISKS.After a year of living with the fear of COVID-19, many investors are hoping 2021 will bring a return to ‘normal,’ even if the new normal may not be exactly like the old one.
 
Optimism about the future has many investors feeling bullish, according to most of the sentiment surveys listed in Barron’s last week.Financial Times reported, “Almost universally, fund managers believe the year will bring a rebound in economic activity, supporting assets that have already soared in value since the depths of the pandemic crisis in March, but also lifting sectors that had been left behind. Bond yields are expected to stay low, lending further support to stock valuations.”
 
This doesn’t mean 2021 will be risk free. In its December market sentiment survey, Deutsche Bank asked more than 900 market professionals about the biggest risks to global financial markets in 2021. Here are the concerns they highlighted:
 
38 percent      Virus mutates and vaccines are less effective
36 percent      Vaccine side effects emerge
34 percent      People refuse to take the vaccine
34 percent      Technology bubble bursts
26 percent      Central banks end stimulus too soon
22 percent      Inflation returns earlier than expected
 
It’s possible none of these will occur and investors will sail smoothly into and through the new year. We hope that’s the case and next year brings with it a return to normal. Just remember, normal doesn’t mean risk-free. In 2021, investors will still need to balance risk and reward on the journey toward their financial goals – just as they do every year.
 
Weekly Focus – Think About It
Qualities you need to get through medical school and residency: Discipline. Patience. Perseverance. A willingness to forgo sleep. A penchant for sadomasochism. Ability to weather crises of faith and self-confidence. Accept exhaustion as fact of life. Addiction to caffeine a definite plus. Unfailing optimism that the end is in sight.
--Khaled Hosseini, Novelist
 
Best regards,
 
Lee Barczak
President
 

 

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor's 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision.
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Contact Details

Morgan Kenwood Advisors, LLC
5130 West Loomis Road
Greendale, WI 53129-1424
Phone: (414) 423-4020
Fax: (414) 423-4023
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.