Happy Friday! We are all watching the Texas disaster and hoping our clients, friends and family are safe and warm now. Such a strange year and then this polar vortex moves all the way south to Texas! This is going to create even tougher times for an already struggling portion of the populace, so we are checking in on the relief/stimulus bill. In addition, you will read about the markets, reasons to be optimistic and how small businesses are faring. Scroll to the bottom for bonus tangent content.
Finally, note that the IRS is holding firm to the April 15 tax filing deadline this year. We know what we will be doing on this snowy weekend!
Market Update: Stocks are rising and core bond prices are falling this year, as expectations are high for vaccines and more government spending (see more on what is needed below). The S&P 500 since the beginning of the year:
We heard from some clients who were surprised to see a slight loss in their January statements: “isn’t the market doing fine?” Yes, it is. Just not the last weekday in January! Monthly statements are a snapshot of your account on just one single day. For the bigger picture, you can always log on to your CP portal.
Optimism is rising as coronavirus cases recede, vaccinations increase, and economists price in a strong recovery for the U.S. economy through 2021. Retail sales in January were impressive, at 7.4% higher than January 2020:
Small businesses are widely considered the backbone of the U.S. economy, and the slow recovery in their return to normal is a major reason for the depressed U.S. labor market. Small business closure rates remain high: 25% were still closed in December, down from 31% in April. Over half of all small businesses reported that they had lower sales in the last 30 days compared to this time last year. Restaurants, bars and clothing stores are in particularly dire straits. This reflects back on the need for intervention that is ‘relief’ not ‘stimulus.’
“The economy is suffering from an acute COVID problem, not a demand problem,” said one prominent economist. (Axios)
Relief/Stimulus update: The markets have built in expectations for a sizeable relief/stimulus bill, and most important to those getting unemployment is the weekly enhanced $300 payments, originally expiring March 14. Congress plans to extend those payments through the end of August and increase them to $400/week until then. By that time, the hospitality industry should be recovering if the vaccines have been successful. This bill is likely to be on the president’s desk by mid-March.
The good news on stimulus, vaccines, low interest rates, etc. is unquestionably positive for stocks in the short term. But just like in life, nothing in markets is free: stocks risk overheating in the coming months, and if that occurs and we see a disorderly rise in bond yields that may end the rally. For you cooks out there, think of it like a deep fryer. Hotter is almost always better, until it is too much—and then it can explode. So, while we welcome the market’s resilience and the higher prices, we do so with a wary eye on bond yields. (Sevens Report)
Famous Black women in finance: This week we read a great story about Maggie Lena Walker, the first Black woman in the country to charter and serve as president of a bank. Her St. Luke Penny Savings Bank opened in 1903 in Richmond, Virginia. Walker’s vision was to create a place where Black residents could keep money in their own community and become financially empowered. By 1920, the bank had issued mortgages to more than 600 Black families, hired a large Black staff and became a point of pride and a role model for Black women. (National Park Service)
Walker was honored in 2017 with a statue in Richmond.
What the world wonders
What is everyone else reading about? A lot of the Google search data for 2020 points to a remarkably hopeful and resilient world. For example, “how to be anti-racist” was Googled more than “how to be a millionaire.” People searched “how to donate” twice as often as “how to save money,” even while the country faced record-setting job losses. See Google’s 3-minute video for yourself. (Marketwatch)
Have a great weekend!
Your Clear Perspectives team