US
Most major indexes set record highs over the course of the week but ultimately ended with mixed results. The Dow Jones Industrial Average rose 0.7%, the S&P 500 Index was up 0.6%, while the Nasdaq Composite was 0.1% higher. For the year, the Dow posted 7.3% positive, the S&P 500 Index gained 16.3%, while the tech-heavy Nasdaq Composite notched up an impressive 43.6%, its best annual performance since 2009. The Dollar Index was up 0.3%, while yields on the 10-year note and the 30-year bond dipped 1 basis point to 0.92% and 1.65%, respectively. Gold ended the week with solid gains closing marginally south of $1,900, supported by a US dollar decline.
President Trump signed the USD 900 billion coronavirus relief bill on Sunday while requesting to raise direct payments to USD 2,000 from USD 600. However, Senate Majority Leader Mitch McConnell objected to the measure being put up for approval by unanimous consent in the Republican-controlled Senate.
Weekly initial jobless claims were at 787,000 for the week, much lower than what was initially expected, while home prices rose and November pending home sales fell 2.6%.
COVID-19 case growth was lower after the post-Thanksgiving spike, but the ongoing increase in hospitalizations raised further concerns about intensive care capacity in some parts of the country. Current active cases stand at over 8 million.
EUROPE
Most European markets closed early due to the New Year’s Eve/Day holidays. European equities dropped lower in the last week of 2020 as markets saw reduced volumes. UK’s FTSE 100 ended 1.45% lower, Germany’s DAX closed 0.31% negative, while France’s CAC-40 recorded a 0.86% loss. Energy stocks were the worst hit, shedding 25.5% as movement restrictions across the continent drastically reduced oil demand. For the year, the pan-European STOXX 600 index recorded a 3.7% drop, German DAX ended with a 3.5% gain, while the UK’s FTSE 100 ended the year 14.34% negative.
The UK government extended its strictest restrictions to curb a surge in infections, hospitalizations, and deaths caused, by the new COVID-19 variant. The government is accelerating its inoculation program after the second vaccine produced by AstraZeneca/Oxford got emergency approval.
Europe has finalized an investment agreement with China that is designed to rebalance trade, despite US concerns. Negotiations were completed on Wednesday during a video conference with Chinese President Xi Jinping and EU officials. The investment treaty that was finalized after seven years of talks would give the EU improved access to the Chinese market for automotive, private health care, cloud computing and air transport services.
JAPAN
The Nikkei 225 Stock Average ended the week with a 3.0% gain. Year-to-date figures for the Nikkei 225 were at positive 16%, while the TOPIX gained 4.8%. Equity markets remained closed on December 31 as well as on January 1. The yen closed the year near JPY 103 against the greenback.
Japan’s industrial output growth was flat for November, which came in much below a 1.2% growth forecast. Also, retail sales contracted in November and consumer prices in Tokyo declined swiftly.
The monthly total of COVID-19 cases topped 19,000 as a record number of infections was detected on Thursday. The holiday shopping spree was the main cause behind the recent spike in cases. The city’s pandemic response experts warned that the city could run out of hospital beds soon if the current trend continued. Also, Tokyo raised its alert level to the highest in December due to the surge.
CHINA
Chinese stocks ended the week at record highs with Shanghai Composite Index rallying 1.7% for the week and ended the year 14% in the green.
The People’s Bank of China is considering plans to force Ant Group to shed equity investments in some financial companies and advised them to rectify violations in the company’s lending, insurance, and wealth management businesses.
China and the EU have finalized an investment agreement that is designed to rebalance trade between the two countries. Negotiations were completed on Wednesday during a video conference with Chinese President Xi Jinping and EU officials.
OIL
The Oil market was more or less stable during the week as positive vaccine developments, now coming from AstraZeneca, was offset by raging COVID-19 cases (Renewed restrictions and lockdowns in parts of Europe and the US have dampened demand further). The Energy Information Administration reported an oil inventory draw of 6.1 million barrels for the week to December 25. This helped push prices marginally higher as WTI crude ended the week at $48.52 and Brent at $51.80 per barrel.
CONCLUSION
Looking back at 2020, the key to keeping your portfolio stable and even make a bit of money in a turbulent environment is to stay calm when markets seem to panic. Investors have realized the value of a well-diversified portfolio coupled with a disciplined investment strategy.
Now with faster vaccine rollouts, markets should see a clear shift from the stay-at-home trend to a much more normal setup. The reopening of the economy should provide those sectors most geared to economic activity an opportunity to outperform.
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