Overview: Stock markets were mixed last week as positive vaccine news was tempered by rising Covid-19 cases and renewed lockdowns and restrictions. Policy uncertainties continued, with concerns about the delays in the election outcome, uncertainty around another fiscal stimulus package, and a potential drawdown of the Federal Reserve monetary facilities. The S&P 500 Index finished the week down -0.7%. International stocks fared better, with developed (MSCI EAFE) and emerging markets (MSCI EM) up 1.9% and 1.8% respectively for the week. In bonds, yields continue to trade in a narrow range, with the 10-year Treasury finishing the week at 0.83%.
This week: The holiday-shortened week will have a calendar full of economic data on Wednesday. Investors will receive a plethora of data mid-week, including data on durable goods, new home sales, gross domestic product (second estimate of the third quarter), initial jobless claims, and personal income and outlays. In addition, we will get a read on the PCE price index, which is the Federal Reserve’s preferred measure of inflation.
A note on China (excerpt from JP Morgan): China’s October activity data showed that the economy continues to recover, with annual growth rates in industrial production (6.9%), fixed asset investment (1.8%), and retail sales (4.3%) picking up steadily. The recent Single’s Day shows that demand remains strong in China. In 2020, Single’s Day was extended to an 11-day shopping festival and sold $74.1 billion of merchandise. In comparison, Amazon’s 48-hour Prime Day event, which was delayed from July to October this year, sold $10.4 billion, and Cyber 5, the 5-day period from Thanksgiving through Cyber Monday, is expected to sell $39.8 billion according to Adobe Analytics. This amounts to close to $50 billion in sales in the U.S., which is still significantly dwarfed by Chinese consumption. Going forward, we expect this trend to continue to hold over the next decade with the rise of the middle-class population, and investors should make sure they have enough exposure to tap into this consumer story.
Sources: Goldman Sachs Asset Management, JP Morgan Asset Management
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