Weekly Economic Update: Mixed Reactions from Markets; Biden Administration Outlines Stimulus Plan

Presented by Nicholas Wealth Management

January 19, 2020

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Weekly Market Update

In this week’s recap: Mixed news elicits a mixed reaction from the markets; incoming Biden Administration outlines stimulus plan.

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The Week on Wall Street

Markets drifted lower last week as uninspired investors digested mixed news on the economic front.

The Dow Jones Industrial Average lost 0.91% while the Standard & Poor’s 500 slid 1.48%. The Nasdaq Composite index stumbled 1.54% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.26%.^1,2,3

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Stocks Drift Lower

Stocks traded without much conviction last week, pushed lower, in part, by a broad retreat in technology. Rising interest rates also dampened enthusiasm, feeding concerns over their effect on current stock valuations.

Markets seemed deaf to a stream of news, moving little on the House impeachment vote, encouraging news on the vaccine front, reassurances from Fed Chair Powell, or a jump in jobless claims. Energy and financials continued their recent advance, while smaller capitalization stocks rose on expectations of becoming beneficiaries of any stimulus bill.^4,5

Stocks turned lower to close the week, following the unveiling of president-elect Biden’s stimulus plan and a weaker-than-expected retail sales number.⁶

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New Stimulus Proposal

Biden revealed his long-anticipated stimulus proposal last week, announcing a $1.9 trillion spending plan to provide further help to an unsteady economy.

Along with monetary easing, fiscal stimulus has been one of the major drivers of the stock market recovery, which is why investors have anxiously awaited his plan.

His proposal seeks to help individuals, including direct payments for qualifying Americans and enhanced unemployment aid. The proposal would also include help for small businesses with a new grant program in addition to the Paycheck Protection Program, and would bolster state finances by funding frontline workers, vaccine distribution, reopening schools, and vital services.

The market reaction was muted. Investors will be watching the extent to which Congress amends Biden’s proposal and the speed at which it’s picked up by the legislature.

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Tip of the Week

If you are getting married and want to buy a home, consider setting up a wedding registry that collects money specifically for a down payment.

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Media

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CITATIONS:

1. The Wall Street Journal, January 15, 2021

2. The Wall Street Journal, January 15, 2021

3. The Wall Street Journal, January 15, 2021

4. CNBC.com, January 14, 2021

5. Yahoo.Finance.com, January 14, 2021

6. The Wall Street Journal, January 15, 2021