The Vantagepoint Market Perspective: Rounding Out a Rollercoaster Year

12/08/2020

 

Uncertainty has characterized much of 2020 and the year’s final month is no different than the 11 that preceded it. In some ways, December looks to be the strangest month of the year, with the holiday season and promise of a vaccine contending with the worsening pandemic and economic warning signs.

Friday’s widely watched employment report brought the latest signals that the economic rebound is waning. U.S. businesses added 245,000 jobs in November, down sharply from the previous month’s 610,000 increase and well below the 440,000 level economists expected.

Meanwhile, though the unemployment rate fell to 6.7%, it was accompanied by a decline in the labor-force participation rate. To put it in perspective, during the first two months of the COVID-19 crisis, the economy shed roughly 22 million jobs. So far, 12.3 million of those have been regained, while over 10 million people remain out of work.

Still, the market — as it has been inclined to do in recent months — seems to have an uncanny ability to dismiss the negative and focus on the positive. Market participants seem to be interpreting the disappointing statistics as increasing the likelihood that both political parties will come together and pass a stimulus bill.

The Elusive Stimulus Agreement

Indeed, Democrats and Republicans do seem to have finally moved closer to bridging their longstanding, differing views about what constitutes an acceptable stimulus package. A bipartisan group of lawmakers introduced a $908 billion package that has gained support in recent days. And, as of this writing, the odds of it passing sometime this week seem to be increasing. However, it’s important to remember that it’s not a done deal until it is approved by both chambers of Congress and signed by the president.  

Separately, the looming prospect of a government shutdown remains, since current federal funding is slated to run out this Friday. But there are promising signs on that front as well since, according to the latest reports, lawmakers are considering extending that deadline by one week to allow negotiations to continue.

Wildcards Remain

More than a month after the presidential election, President Trump has yet to concede to his challenger, although it has become increasingly clear both based on the vote tallies and the result of the court cases so far, that Joe Biden is in fact the president-elect.

And that adds yet another layer of uncertainty to the picture. Throw in the January 5 election in Georgia — that will determine which party controls the Senate — and questions remain about which political party will have the upper hand in Washington in 2021.

Wall Street, however, seems to have already concluded that the election outcome is effectively settled, with the Republicans in control of the Senate and the Democrats holding the presidency and the House of Representatives.

Traders see this as a positive because a divided government, in their view, is unlikely to pass major legislation that will negatively impact businesses or drastically change the economic equation. However, we recognize that, at this point, much remains inconclusive, so any prediction of the outcome of the remaining election decisions in Georgia is premature. If election results in January surprise Wall Street, market volatility could quickly resume.

Pandemic Spirals

All of this is happening against a backdrop of COVID-19 spreading like wildfire both in the U.S. and abroad. Here at home, the number of cases stands at 14.8 million, of which over 282,000 people have sadly passed away.  

As a result, lockdowns, curfews, and other social distancing rules are tightening in many areas of the country in an effort to curb the virus’ spread and ease the burden on hospitals. For example, in California, the governor has instituted shutdowns and stay-at-home orders throughout large swaths of the state, which are expected to stay in effect through the end of the year.

The fear is that the number of critically ill patients will overwhelm hospitals, forcing them to limit care and to become more strict about who can and who can’t get both a hospital bed and the necessary care from doctors and nurses who are stretched thin. Any decisions that could limit access to health care will affect not just those stricken with COVID-19, but also those suffering from other ailments or injuries. 

While shutdowns of any type create heavy burdens for individuals and businesses, we support efforts to ensure that our front-line health-care workers are able to do their jobs caring for sick patients without further endangering their own well-being.

Hope on the Horizon

But there have been some promising developments, particularly on the vaccine front. Currently, there are three vaccines awaiting approval. And government officials expect to have inoculated 20 million people in the United States by the end of the year.

We’re highly encouraged by the vaccines and we hope the reviews show that they’re safe and can be deployed as quickly as possible. Next year should bring more widespread vaccinations and we contend that those who are particularly at risk, such as health-care workers, the elderly, and public servants should be among the first to be protected.

In the meantime, we continue to believe that measures aimed at curtailing the virus’ spread including mask wearing, social distancing, contact tracing, and other efforts are the most effective tools we have until vaccinations are widely available.

Disclosures:

This information is intended for institutional use only and is not intended for individual investors or the general public. This article includes links to external websites. While we believe this information to be reliable, we cannot guarantee its complete accuracy.

Please note that this content was created as of the date indicated and reflects the authors’ opinions. These opinions are subject to change, without notice, due to market conditions or other factors.

This is not intended as a solicitation nor does it constitute investment, tax, or legal advice. Reference to any fund or asset class is not a recommendation to buy, sell, or hold that fund or asset class. Neither ICMA-RC nor its subsidiaries are responsible for any investment action taken as a result of the information provided herein or the interpretation of such information. Investors should carefully consider their own investment goals, risk tolerance, and liquidity needs before making an investment decision. Investing involves risk, including possible loss of the amount invested. Past performance is no guarantee of future results.

When Funds are marketed to institutional clients by our Investment Only (IO) team, the Funds are offered by ICMA-RC Services, LLC (RC Services), an SEC registered broker-dealer and FINRA member firm. RC Services is a wholly owned subsidiary of ICMA-RC and is an affiliate of VantageTrust Company, LLC and Vantagepoint Investment Advisers, LLC. Learn more at www.vantagepointfunds.org.                                    

Disclosures:

This website is for institutional use only and is not intended for individual investors or the general public.

This information is intended for institutional use only and is not intended for individual investors or the general public.

Please note that this content was created as of the date indicated and reflects the authors’ opinions. These opinions are subject to change, without notice, due to market conditions or other factors.
This is not intended as a solicitation nor does it constitute investment, tax, or legal advice. Reference to any fund or asset class is not a recommendation to buy, sell, or hold that fund or asset class. Neither ICMA-RC nor its subsidiaries are responsible for any investment action taken as a result of the information provided herein or the interpretation of such information. Investors should carefully consider their own investment goals, risk tolerance, and liquidity needs before making an investment decision.

When Funds are marketed to institutional clients by our Defined Contribution Investment Only (DCIO) team, the Funds are offered by ICMA-RC Services, LLC (RC Services), an SEC registered broker-dealer and FINRA member firm. RC Services is a wholly-owned subsidiary of ICMA-RC and is an affiliate of VantageTrust Company, LLC and Vantagepoint Investment Advisers, LLC. Learn more at www.vantagepointfunds.org.