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Market Strategy 1/11/2021

  • John Stoltzfus
  • January 11, 2021

How Can I Miss You if You Won’t Go Away?

Sometimes it takes more than the turn of the calendar page to escape the prior year’s legacy
Key Takeaways
  • Markets are off to a strong start in 2021 notwithstanding distribution challenges for the Covid-19 vaccine and a resurgence in infections worldwide.
  • Although the loss of Republican control of the Senate raises concerns about the potential for increased US indebtedness and higher taxes, the market appeared to focus on the potential positive effects of further fiscal stimulus.
  • The unofficial start of Q4 earnings season for the S&P 500 begins on Friday with several major banks reporting results.
  • Economic data released last week showed a significant decline in employment in the hospitality and leisure segment of the economy as municipalities shuttered indoor dining even as other segments of the economy added jobs.   
capitol building

The legacy of 2020 lived on in the first week of the New Year as: the Senate chambers were overrun by protesters; distribution of vaccines key to help stem the spread of the pandemic remained challenged; interest rates crept higher; the monthly jobs report fell short of expectations in a key survey of economists’ forecasts and the control of the Senate was lost to the Democrats likely opening the door to additional spending, higher taxes, and increased regulation.

Any and all of the aforementioned occurrences and outcomes might have been expected to provide at least a haircut or even perhaps just a pause to the stock market’s recent upward trajectory. Instead stocks moved higher over the first week of 2021 if not without a slight wobble at the start of last week when the S&P 500 closed down 1.70% last Monday.

For the week ending last Friday, January 8 the Dow Jones Industrials, the S&P 500, the S&P 400 (mid-caps), the Russell 2000 (small caps) and the NASDAQ Composite (some 40% weighted in tech or tech related stocks) closed respectively higher on the week by: 1.57%, 1.79%, 4.8%, 5.88% and 2.4%.

These benchmark moves had even long-term bulls like us wondering if the stock markets are climbing the proverbial “wall of worry” too fast for this early in a year with so many potential hurdles that might lie ahead in a year where COVID-19 remains a challenge to public health and economic re-openings stateside (as well as abroad) and a major political transition that has just begun to get underway in Washington, DC.

Quotation from Aenean Pretium

As earnings season gets underway and gathers momentum a key factor will be not just how expectations were met, missed, or exceeded in the quarter but how managements of the companies reporting frame the quarters that lie ahead.

It’s not that the challenges facing the country and the markets are insurmountable but rather that they are significant and that they will take time for the markets to digest over the course of at least the first half of the year.

In our view as investors with broad, diversified exposure to equities, we believe it important for investors to right size their expectations. Know what you own, why you own it and have reasonable assumptions about how what your portfolio is invested in will perform in a dynamic environment driven by secular trends like globalization and technology—trends that affect all 11 sectors, market capitalizations and styles (growth and value) stateside and across all the regions of the world to varying degrees against a political and geopolitical landscape that is undergoing or about to undergo significant changes in two of the largest economies of the world.

Earnings Season Begins Again

The week ahead brings the unofficial start of Q4 earnings season for the S&P 500 with several of the big US banks reporting at the end of the week and with several other major banks reporting in the week that follows.

As earnings season gets underway and gathers momentum a key factor to Q4 earnings season will be not just how expectations were met, missed, or exceeded in the quarter but how managements of the companies reporting frame the quarters that lie ahead.

With just 18 of the benchmark’s 500 companies having reported thus far it is way too early to “divine the quarter.” The weeks ahead should provide some clarity of how managements view prospects for earnings should the tax regime for corporations change. In addition, we could gain some insight as to which companies could benefit from increased government spending via new programs and fiscal policy.

John Stoltzfus of Oppenheimer Asset Managment Inc.

John Stoltzfus


Chief Investment Strategist, Oppenheimer Asset Management Inc.

John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.

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