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Integrated Insights -- Week of November 23, 2020

Integrated Insights -- Week of November 23, 2020

November 24, 2020

The holiday shortened week saw the Dow Jones Industrial Average hit the 30,000 mark.  The "real economy" continues to toil, as jobless claims jumped and lawmakers continue to argue over further stimulus.

Tug of War: Vaccine Optimism versus Surging COVID Cases and Policy Uncertainty -- VOYA Investment Management

VOYA provides an interesting view on the bond market as direction for the economy and the market vacillates on headline trading news. VOYA views the recovery forming a "K shape" with certain sectors outperforming others.

Bond Market Outlook

  • Global Rates: vaccine optimism to allow ten year U.S. Treasury yield to float higher but remain in 0.8 – 1.2% range
  • Global Currencies: U.S. dollar trends weaker against DM, EM currencies
  • Investment Grade: remain cautious on spreads into year end, but look to add high quality issuers on weakness
  • High Yield: valuations less attractive after rally, select opportunities remain among higher- quality spreads for incremental yield
  • Securitized: most virus-impacted sectors such as CMBS to continue to receive bid amid vaccine optimism
  • Emerging Markets: 3Q20 recovery continued to build through year end but still uneven across markets, leading to select opportunities

Economic Outlook: Approaching the dawn -- Vanguard 

Vanguard provides a concise summary of considerations for the global economy going forward. Of particular note, are their thoughts on COVID-19's hastening of market evolution in certain areas.

1. A profound yet ultimately temporary setback. Social activities and the industries most reliant on them will rebound, as they have following past pandemics.

2. An accelerated future. Trends that Vanguard and others have previously discussed, ranging from work automation to digital technologies to certain business-model disruptions, have only been accelerated by the shock of COVID-19.

3. Pivots in policy. This crisis has seemingly altered the expectations of, and preferences for, certain government policies, ranging from more forceful efforts by central banks to drive up low inflation to more aggressive spending by fiscal authorities amid economic headwinds.

4. Unaltered reality. Despite the extraordinary events of 2020, some aspects of the global economy may ultimately stay as they are. In our view, these would include the multifaceted U.S.-China relationship and the likelihood of increasing innovation in the years ahead.

The Thanksgiving Economy -- Cetera Investment Management

While providing some interesting historical tidbits on Thanksgiving, Cetera also reminds us of the economic significance of the holiday.

Travel: According to AAA, an estimated 55 million Americans traveled more than 50 miles for Thanksgiving in 2019, including 4.5 million traveling by plane.8 While this year we’ll likely see fewer travelers than in years past, considering TSA passenger traffic has recently been 60% to 70% lower than last year’s levels due to COVID- 19, air traffic will probably see a bump the week of Thanksgiving.

Thanksgiving Dinner: The Thanksgiving meal not only impacts your waistline, but also your wallet. Fortunately, the annual dinner-table marathon is reasonably priced. According to the American Farm Bureau Federation, last year’s Thanksgiving dinner cost an average of $48.91 for 10 people, or slightly below $5 per person.

Holiday Shopping: It’s hard to project what this year’s Thanksgiving weekend shopping data will look like in aggregate because of the pandemic, but a Deloitte consumer survey indicates that holiday shopping will fall. The rapid growth in online shopping, combined with an emphasis on social distancing, will likely result in Cyber Monday spending smashing last year’s record levels.

We hope you have a safe, restful, & healthy Thanksgiving holiday.

Jason Vitucci & staff