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Perspectives

The Market is always looking forward

by Fortem Financial January 11, 2021

After one of the craziest weeks I can ever remember, Equity markets surged higher on expectations that Washington DC is poised to deliver more financial stimulus. The Senate runoff races in Georgia were both won by Democrats and they have been promising $2000 stimulus checks to a large portion of the U.S. population. As a result, inflation expectations and a potential rise in economic activity fueled the S&P 500 index to a 1.59% gain last week. Cyclicals led the way as Energy, Materials, and Financials were the top three sectors. Oil rallied to over $50 for the first time since last February on news that Saudi Arabia decided to cut oil production as inventories are falling. Last week, four of the top ten performing stocks in the S&P 500 were energy names. They were up an average of 19.31% with oil servicing company Technip FCM PLC up 24.46% as the top performing Energy name. With the cyclical rally, value trounced growth as the S&P 500 Value index was up 2.35% and the S&P 500 Growth index managed only a 0.37% return. Tesla Inc. returned 24.70% last week which pushed its market cap to $834b, 5th largest in U.S. names passing Facebook Inc. This week’s rally also pushed Tesla Founder/CEO Elon Musk to the top of the world wealth list with $209b, passing Amazon.com Inc Founder/CEO Jeff Bezos who is worth a meager $186b. Walgreens Boots Alliance Inc. announced 4Q earnings and revenue higher than analyst estimates. Walgreens also announced a plan to sell their Alliance Healthcare wholesaling business to AmerisourceBergen Corp. for $6.5b. Walgreens is seeking a business restructuring after losing half of its market cap over the last few years. Looking ahead to this week, we remain constructive on equities. News headlines on the size of Government stimulus will likely push stocks higher or lower. The 10-year Treasury went from 92bps to 112bps last week and as stimulus expectations grow it's likely that inflation and interest rate expectations will grow in lockstep. Equities have historically been a very strong inflation hedge and we believe that will continue.

Longer-term Treasury yields began the year moving significantly higher last week, with the U.S. 10-year Treasury yield rising above 1% for the first time since March. Yields rose after Democrats won control of the Senate, winning both runoff elections in Georgia, as the market priced in more economic stimulus and higher inflation. The 10-year breakeven rate, which gauges the market’s expectation of inflation, topped 2% for the first time since 2018 last week. The jobs report released on Friday showed the U.S. lost 140,000 jobs in December, which broke a streak of 7 months of job growth since the economy lost over 20 million jobs in April. Restaurants and bars bore the brunt of the decline, losing 372,000 jobs last month. The unemployment rate remained at 6.7%, which remains elevated from pre-pandemic levels but is still a significant recovery from the 14.8% unemployment rate in April. Meanwhile, manufacturing finished the year strongly with the ISM Manufacturing Index beating expectations and registering its highest level since 2018.
Source: First Trust


Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments. Data provided by FactSet.

Sincerely,

Fortem Financial
(760) 206-8500
team@fortemfin.com

 

 

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The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided. Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf
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Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

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