“Hold The Line…"

MONETARY

• The Federal Reserve’s most recent Beige Book release noted that overall economic activity increased modestly since the prior release, with only two reporting districts reporting no change, and two districts reporting a modest decline²
  • Districts experiencing stagnation and declines largely attributed more restrictive virus containment measures as the primary reason²
  • Residential Real Estate remains a pocket of strength, and Manufacturing continues to see a rebound²
  • On the employment front, labor demand was strong in Manufacturing, Construction, and Transportation sectors. However, Leisure & Hospitality related sectors experienced renewed cuts due to increased COVID-19 restrictions²
    • Firms with high demand for labor continued to report hiring difficulties, and as a result have reported offering higher wages and schedule flexibility to attract workers back into the labor force²
  • Overall business sentiment was optimistic for 2021 growth, citing further rollout of vaccines to combat the pandemic²
  • Regarding prices, standout areas of inflation were construction and building materials, steel products, and shipping services. Home prices were also noted as having grown as a result of the aforementioned increase in construction costs²
• Federal Reserve Vice Chair Richard Clarida states that the Fed will not raise rates until inflation reaches 2% for at least a year, further reiterating the Fed’s stance to target an average inflation rate of 2% over the longer term³
  • (Clarida) “We are not going to lift off until we get inflation at 2% for a year. … We are trying to tie our hands. We are saying we are not going to hike until we get to 2%”³
• Fed Chairman Jerome Powell reaffirms markets that the Federal Reserve will not start tapering back its asset purchasing program any time soon⁵
  • (Powell) “the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.”⁵

 

FISCAL

• President Joe Biden unveils his initial proposal for a brand-new stimulus package related to COVID-19 relief efforts called the American Rescue Plan. Some highlights of the proposal are as follows:⁴
  • Total spending in the package is about $1.9T and would include another round of direct stimulus checks of $1,400 per person⁴
  • Additionally, the package calls for augmenting additional unemployment benefits to a level of $400 per week through September 2021⁴
  • Also included in the bill is a raise in the federal minimum wage to $15/hour from its current level of $7.25/hour⁴
  • The child-tax credit would also be raised from its current level of $2,000 to $3,000⁴
• Democratic lawmakers float the possibility of using a process known as Budget Reconciliation to potentially pass the American Rescue Plan if negotiations around the bill prove difficult⁶
  • Regarding the timeline for passage of the American Rescue Plan, Senate Majority leader Chuck Schumer states that the bill could be passed within the next “month to month and a half”⁶
• Separate from the American Rescue Plan, President Joe Biden is largely expected to unveil a new infrastructure bill in February⁴

 

VACCINE

• Johnson & Johnson reports interim results of its Phase 1&2 trial of its COVID-19 vaccine, showing that the vaccine produces a long-lasting immune response¹
  • Company said the vaccine produced neutralizing antibodies for 90% of patients within 29 days, which increased to 100% of patients within 57 days¹
• Johnson & Johnson report results from its late-stage COVID-19 vaccine trial showing its single-dose vaccine was 66% effective⁷
  • Johnson and Johnson’s vaccine requires only one shot, and as such would have the potential to greatly increase the speed at which full vaccinations could occur¹
  • The company plans to apply to the FDA for an Emergency Use Authorization within the first week of Februray⁷
• Novavax reports results from its late-stage COVID-19 vaccine trial showing that its vaccine was 89% effective⁸
  • Company also reports that its vaccine was 86% effective against the U.K. variant of the virus, and just shy of 50% effective against the South African variant⁸
• As of January 30, the CDC estimates that the number of people receiving 1 or more vaccine doses in the US reached 24,064,165⁹
  • CDC estimates that there have been 49,932,850 total doses distributed thus far⁹

 

MISCELLANEOUS

• Several individual companies, including but not limited to GameStop & AMC Entertainment, experience drastic increases in prices resulting from buying pressure largely attributable to the popular Reddit community known as r/WallStreetBets¹⁰
  • Multiple hedge funds with outstanding short positions in the various affected companies experience severe trading losses and are largely forced to buy back shares to close out their positions, a phenomena known as a “Short-Squeeze”¹⁰
  • For a more comprehensive and in-depth look at the timeline of events surrounding GameStop and AMC Entertainment, please visit the article cited in Annotation #10 in the Annotations section below

 

[See Below for Disclosures & Annotations]

DISCLOSURES

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

The companies presented here are for illustrative purposes only and are not to be viewed as an investment recommendation.

 

ANNOTATIONS

1. Bloomberg. “J&J One-Shot Vaccine Grants Lasting Response in Early Study”. January 13, 2021
2. Federal Reserve. “The Beige Book: Summary of Commentary on Current Economic Conditions”. January 13, 2021
3. Reuters. “Clarida says Fed won’t raise rates until its sees 2% inflation”. January 13, 2021
4. The Wall Street Journal. “Biden Proposes $1.9 Trillion Covid-19 Relief Package”. January 13, 2021
5. Federal Reserve. “Federal Reserve issues FOMC statement”. January 27, 2021
6. Bloomberg. “Biden ‘Open to Negotiate’ on Stimulus, Seeks GOP Backing”. January 25, 2021
7. US News. “Johnson & Johnson Says Single-Dose Coronavirus Vaccine is 66% Effective”. January 29, 2021
8. US News. “Novavax Says Its Coronavirus Vaccine Is Nearly 90% Effective”. January 28, 2021
9. CDC. “COVID Data Tracker”. January 31, 2021.
10. USA Today. “How r/WallStreetBets took down a hedge fund and rode GameStop stock to the moon”. January 28, 2021
11. The Wall Street Journal. “Wall Street Hedge Funds Stung by Market Turmoil”. January 28, 2021