Hello, I’m Greg Curvall, Senior Portfolio Manager with Fifth Third Bank.
In a shortened trading week that saw the ushering in of the Biden administration, all major indices hit fresh all-time highs, with the tech-heavy Nasdaq Composite Index leading the way, up over 4% for the week. Investors acknowledge that valuations are a bit extended, but argue that low interest rates, imminent fiscal stimulus and unprecedented pent-up consumer demand justify higher stock prices.
President Joe Biden and Vice President Kamala Harris took their oaths of office on Inauguration Day. There had been concerns about more violence in Washington, but the event concluded without any major disruptions. In his first week on the job, President Biden issued a series of executive orders addressing a wide range of issues, from expediting Covid testing and vaccinations to providing financial support for low-income families.
Investors are anxiously waiting for the next round of fiscal stimulus to get approved by Congress. The Biden administration is trying to move quickly on its $1.9 trillion relief bill, though there are already signs that it will face some pushback in the Senate. At her Treasury Secretary confirmation hearing last week, Janet Yellen told the Senate Finance Committee they should “act big” on coronavirus relief to support the economic recovery.
U.S. Covid-19 infections appeared to be plateauing last week, with the seven-day average declining in 46 states. The vaccine rollout remains off to a slow start, though it has begun to accelerate. The U.S. is now approaching an average of one million vaccine doses a day, the threshold that President Biden is aiming for in his first 100 days in office.
Last week, both U.S. housing starts and building permits, a proxy for future construction, rose in December at their fastest pace since late 2006, and both exceeded estimates. In the U.S., the inventory for available homes is not enough to meet demand as low mortgage rates and out-of-towners looking to purchase a second home are driving up prices. Economists predict these trends will continue in 2021, though mortgage rates may rise slightly from record lows if the economy improves as vaccines are administered in greater numbers.
In the week ahead, on Wednesday the Federal Reserve meets to set monetary policy and is expected to hold rates unchanged and will likely stress that short-term rates will remain near zero for the foreseeable future. On Thursday we’ll get the first look at U.S. economic growth for the fourth quarter of 2020. Economists are expecting the report to show a 4.2 percent expansion. We’ll also get reports on consumer confidence, durable goods orders, personal income and personal spending.
As always, will be watching and reporting back to you next week. Thank you.