Weekly Economic Update: December 14th, 2020

In this week’s recap: Rising number of COVID-19 cases and no progress on a stimulus bill lead to a bumpy week on Wall Street; U.K. anticipates “No-Deal” for Brexit.

THE WEEK ON WALL STREET

Stocks retreated last week on rising COVID-19 infections and slow progress on an economic relief bill.

The Dow Jones Industrial Average dipped 0.57%, while the Standard & Poor’s 500 dropped 0.96%.  The Nasdaq Composite index fell 0.69% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, declined 0.05%.^1,2,3

STIMULUS STALLS, STOCKS STUMBLE

The market grappled all week with worries over rising COVID-19 cases and the economic restrictions that followed. Nevertheless, there were moments of optimism— such as the starting of vaccinations in the U.K.— that drove markets to record highs.⁴

But gains could not be sustained as an agreement on a fiscal stimulus bill remained elusive and daily news regarding COVID-19 cases undermined investor sentiment.

Markets were also challenged by having to absorb a number of new and secondary stock offerings last week, including two high-profile technology IPOs. The Energy sector continued its strong run, while small and mid-cap stocks posted another week of positive performance.⁵

A “NO-DEAL” BREXIT MORE LIKELY

The prospects of an agreement to manage Britain’s exit from the European Union by year  end dimmed as the two parties failed to narrow their differences in a meeting held last week.⁶

Though primarily a European issue, a no-deal Brexit may hold consequences for U.S. businesses and investors. The failure to reach an agreement has the potential to disrupt an already fragile supply chain and cause issues in the financial markets. A supply chain disruption may weaken European economies (e.g., Germany) that are important to American companies. Another consequence may be a stronger U.S. dollar, which would make American exports more expensive and less competitive.

Little time remains in striking an agreement since the prevailing framework ends December 31, 2020.

T I P   O F   T H E   W E E K

Starting a small business? A written plan is handy for forecasting, budgeting and presenting your idea to potential investors. A written plan is far preferable to one you keep in your head.

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Industrial Production.

Wednesday: Retail Sales, Federal Open Market Committee (FOMC) Announcement.

Thursday: Housing Starts, Jobless Claims.

Friday: Index of Leading Economic Indicators.

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Thursday: General Mills (GIS).

Friday: Darden Restaurants (DRI).

“You’re born an original. Don’t die a copy.”

JOHN MASON

THE WEEKLY RIDDLE

At a class reunion, everyone shakes hands exactly once with every person present. That results in a total of 28 handshakes. In total, how many people are at the reunion?