Monthly Markets Memo - December 22, 2020

World Money Small.jpgby Dan Zalipski, CFA 

There is not much you can say about 2020 that has not already been said.  I am sure we are all eager to see the calendar roll over and let 2020 take its place in the history books.  The markets are sitting at all-time highs while the underlying economy continues to recover from the effects of the pandemic.  Concerns remain as the recovery is expected to slow during the winter months.  The Fed continues to stress the need for Congress to pass the additional economic stimulus.  Negotiations for one last-ditch effort to get a stimulus passed before year-end have produced a tentative agreement that could see direct cash payments sent to citizens before the new year.

Economic activity is expected to slow as winter descends on the country.  Cold weather is pushing us back inside at the same time we are experiencing another wave of COVID-19 infections and hospitalizations.  A patchwork of local lockdowns and stay-at-home orders is adding to the pain as consumers hunker down for the season.  There appears to be a light at the end of this tunnel as the FDA has begun to approve various vaccines from the major pharmaceutical companies, with many states already distributing them to front-line healthcare workers and our more vulnerable citizens.  As production and distribution continue to ramp up, more and more individuals will gain access to the vaccines, reducing the need for mitigation and enabling a return to normalcy.

Despite seeing that metaphorical light at the end of the tunnel, we still have some distance to cover to get there.  The Federal Reserve reinforced this notion in their December FOMC statement.  The Fed cited the pandemic’s tremendous human and economic hardship inflicted on the country while confirming their commitment to accommodative policies.  The Federal Reserve has been instrumental in addressing liquidity issues aimed at ensuring the markets continue to function in an orderly manner.  They have also been keeping interest rates extremely low to promote maximum employment and price stability.  Despite all the assistance the Fed has provided the economy and country, they continue to recognize their limitations and call on Congress to pass an additional stimulus aimed at providing support for both small businesses and consumers. 

As is tradition, Congress seems to be waiting until the eleventh hour.  On again off again negotiations have reportedly resulted in a tentative agreement that could potentially see cash making its way to consumers and small businesses before year-end.  The House and the White House were closing in on a deal shortly before the election, but their efforts fell short as the Senate signaled a lack of support.  Senate Majority Leader Mitch McConnell has changed his tune and signaled that negotiations on a $900 billion dollar stimulus bill are nearing an agreement.  The bill reportedly provides more support for small businesses, likely through the existing Paycheck Protection Program (PPP).  Consumers may be in line for another direct cash payment, and those receiving unemployment could see an extra $300 a week.  The details of who would qualify and how much money would be received are still developing. 

With COVID-19 vaccines being approved and distributed, we have a potential and hopeful sightline to the end of this pandemic.  There is still some work to be done to get us there, but it seems the economic concerns will likely be addressed as Congress looks to provide support to those in need.  In the meantime, the Fed intends to keep rates low to support the ongoing recovery.  As 2020 comes to a close, we at Vantage wish everyone the best during this holiday season.  Merry Christmas, and Happy New Year.

“We’re not leaving here without a Covid package.  No matter how long it takes.”
Senate Majority Leader Mitch McConnell



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