January 11, 2021

Weekly Investment Update

The S&P 500, a broad measure of large publicly-traded US companies, advanced to another all-time high last week as the Democratic Party gained control of the Senate via the run-off elections in Georgia. The Democrats will control both houses of Congress when President-elect Biden is sworn in, which makes the prospect of significant additional fiscal stimulus more likely, both in the form of direct cash payments to Americans as well as infrastructure spending.

Equity markets advanced on the news, but US Treasuries declined as bond investors likely anticipate the potential for higher future interest rates and inflation from the additional fiscal spending. While the current environment is certainly unique given the backdrop of the global pandemic as well as unprecedented fiscal and monetary stimulus, the chart below provides historical context for how various assets have performed under differing inflation regimes.

Chart depicting high and rising inflation, High and falling inflation, Low and rising inflation, and Low and falling inflation

Source: J.P. Morgan Asset Management. *High or low inflation distinction is relative to median CPI-U inflation for the period 1988 to 2020 (33 years), which was 2.5% y/y. Rising or falling inflation distinction is relative to previous year CPI-U inflation rate. Indices: Bonds – Bloomberg Barclays U.S. Aggregate; Cash – Bloomberg Barclays 1-3 Month T-Bill index since its inception in 1992 and 3-month T-Bill rates prior to that; U.S. high yield – Bloomberg Barclays US Aggregate Credit (corporate high yield); Equities – S&P 500; Growth – Russell 1000 Growth; Value – Russell 1000 Growth; Small Cap – Russell 2000; EM equity – MSCI Emerging Markets (USD); REITs – FTSE Nareit / All Equity REITs; Commodities – Bloomberg Commodity Index since its inception in 1992 and S&P GSCI prior to that; Gold – NYM $/ozt continuous future closing price. For illustrative purposes only. Past performance is not indicative of comparable future returns. Returns are based on calendar year performance and are total return unless otherwise specified.

Guide to the Markets – U.S. Data are as January 7, 2021.

Key Economic Releases This Week

Day	Report	Period	Consensus Est.	Previous
Tuesday, Jan. 12	NFIB Small Business Optimism Index	December	100.3	101.4
Wed., Jan. 13	Consumer Price Index (monthly rate)	December	0.4%	0.2%
Thursday, Jan. 14	Continuing Jobless Claims	Week of Jan 2^nd	5.0 million	5.1 million
Friday, Jan 15	Retail Sales (monthly rate)	December	0.0%	-1.1%
Friday, Jan 15	U of Michigan Consumer Sentiment (prelim)	November	80.0	80.7

Source: Bloomberg

Asset Class Returns

Category	Representative Index	YTD 2020	Full Year 2020
Global Equity	MSCI All-Country	2.7%	16.3%
US Large Cap Equity	S&P 500	1.9%	18.4%
US Small Cap Equity	Russell 2000	5.9%	20.0%
Foreign Developed Equity	MSCI EAFE	3.2%	7.8%
Emerging Market Equity	MSCI Emerging Markets	4.8%	18.3%
US High Yield Fixed Income	ICE BofAML High Yield	0.2%	6.2%
US Fixed Income	Barclays Aggregate Bond	-0.9%	7.5%
Cash Equivalents	ICE BofAML 0-3 Mo Deposit	0.0%	0.5%

Source: Morningstar
As of January 8, 2021

Prices & Interest Rates

Representative Index	Current	Year-End 2020
S&P 500	3,825	3,749
Dow Jones Industrial Avg.	30,993	30,497
NASDAQ	13,097	12,886
Crude Oil (US WTI)	$52.24	$48.52
Gold	$1,834	$1,893
US Dollar	90.10	89.94
2 Year Treasury	0.14%	0.13%
10 Year Treasury	1.13%	0.93%
30 Year Treasury	1.87%	1.65%

Source: Bloomberg, US Treasury
As of January 8, 2021

Past performance may not be representative of future results.  All investments are subject to loss.  Forecasts regarding the market or economy are subject to a wide range of possible outcomes.  The views presented in this market update may prove to be inaccurate for a variety of factors.  These views are as of the date listed above and are subject to change based on changes in fundamental economic or market-related data.  Please contact your Financial Advisor in order to complete an updated risk assessment to ensure that your investment allocation is appropriate.  