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2021 Off to a Fast Start

2021 Off to a Fast Start

January 28, 2021
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The first week of 2021 has already had many ups and downs. Just because it’s a new year doesn’t mean that the 2020 issues go away, and so far, 2021 has been no exception to this rule.

The markets opened on January 4 and traded lower out of the gate, with the S&P 500 dropping 1.5%. The last time the market opened lower was in 2016, when the S&P 500, the Dow Jones, and the Nasdaq Composite all dropped on the first trading day of the new year.1,2

The stock market’s first hurdle of the New Year was to assess the runoff elections happening for the two Senate seats in Georgia. A special election has only happened three other times in our nation’s history, so the market appeared anxious about the process.3,4

The bond market also got into the act early in the new year. The yield on the 10-year Treasury bond closed over 1% for the first time since March 2020 as investors anticipated a pick up in inflation.5

The market’s second hurdle was the electoral college count that would confirm Joe Biden as the 46th president of the United State. A protest during the vote count unnerved investors, and most of the New Year’s rally was undone. But a day later, the market climbed higher as traders looked past the unrest.6

What does this fast-paced market activity mean for you, as an investor?

There will always be a lot of noise. But remember, making a change to your portfolio should be driven by sound analysis, not an emotional response to current events. The events of the past few days are part of the volatility that comes along with investing, and something we’ve anticipated as we developed your overall financial strategy.

If you are concerned about one or more of the policies being discussed in our nation’s capital, please give us a call. We’d welcome the chance to hear your perspective, and hopefully, we can provide some insight and guidance.

Earnings Season Gets Underway

Every few months, you may hear the phrase “earnings season” as you listen to financial news.

But what exactly is “earnings season,” and why is it important to Wall Street?

Earnings season is the time when a majority of publicly traded companies release their quarterly financial reports.  Companies often go into great detail about their business, and some may guide what lies ahead.

Typically, earnings season starts several weeks after the calendar quarter comes to a close. For example, the fourth quarter's earnings season began in mid-January, and the majority of companies expect to release their earnings over the next six weeks.7

In recent weeks, some market watchers have expressed concerns about stock-price valuations. Stocks are currently trading at about 23 times 2021 earnings, above the historical range of715 to 17 times forward earnings.8

Expectations for a robust economic rebound may explain today's valuations; a rise in corporate earnings may accompany these. As earnings season gathers momentum, we’ll be able to see if the optimism is warranted.9

Over the next few weeks, you can expect to hear some upbeat comments about the fourth quarter. But brace for some negative reports. If you hear some confusing commentary, please give us a call. We'd welcome the chance to talk about what earnings are saying about the overall economic outlook.

1. Barrons.com, January 6, 2021
2. USAToday.com, December 31, 2020
3. WashingtonPost.com, January 5, 2021
4. CNN.com, January 6, 2021
5. The Wall Street Journal, January 6, 2021
6. Yahoo.com, January 6, 2021
7. Insights.FactSet.com, January 22, 2021
8. CNBC.com, January 21, 2021
9. Insights.FactSet.com, January 22, 2021

Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

Indexes discussed are unmanaged and you cannot directly invest into an index. Past performance is not a guarantee of future results.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.