A temporary hospital set-up in an American city
Welcome to 2021! We suspect you were happy to bid its predecessor farewell.
Certainly, the year 2020 will go down in history as one of the more difficult, because a contagious and deadly virus (now commonly called COVID-19) exploded across the planet. It has infected over 85 million people and killed over 1.8 million and it is far from contained. It also resulted in extreme economic disruption and the loss of millions of jobs. It upended life in countless ways.
As we enter 2021, the story will still be about COVID-19. But the focus will be on the distribution of vaccines and our willingness to take the shots. Once we get to herd immunity, life will return to something we recognize as normal.
For investors, the year ended with the major U.S. stock market indices breaking new all-time records. But it was an extremely volatile year in the markets.
It may be a blur in your mind, but the stock market set numerous records this past year. It sold off faster than ever before, falling 30% in only 22 trading days from its peak on February 19. The coronavirus crash was driven by panicked investors who were processing the implications of a global pandemic. Then, without warning, the market staged a record-breaking rally. In 65 trading days, the S&P 500 index gained 41%.
The recovery continued through the rest of 2020, as investors expressed optimism about the development and distribution of vaccines and the ability of the world’s advanced economies to weather the virus and return to growth.
The Dow Jones Industrial Average closed out the last trading day of 2020 with an increase of 197 points, or 0.65%. The S&P 500 index rose 24 points, or 0.64%. The Nasdaq increased 18 points, or 0.14%.
For the year, the Dow advanced 7.25%, the S&P 500 index rose 16.26% and the tech-heavy Nasdaq added 43.64%.
The yield on the 10-year Treasury Note finished 2020 at 0.916%. It started the year at 1.788%.
Spot gold traded at $1,901 and finished 2020 up 22.27%. West Texas Intermediate Crude futures for February 2021 delivery traded at $48.42 a barrel. Oil was down 14.1% in 2020.
Globally, across 213 countries and territories, there have been nearly 85 million confirmed cases and over 1.8 million deaths. In the United States, over 20 million have been infected and over 350,000 have died.
A New Variant
A few weeks ago, researchers discovered a mutation of the coronavirus in Britain. Health authorities were concerned, because they quickly realized this new variant was spreading much faster than the original virus. It is believed to be 50% more transmissible. The new variant has been identified in numerous countries around the world, including the United States.
Such mutations are common among viruses. Fortunately, infectious disease experts believe the mutation is no more dangerous than the first strain. The vaccines that are coming online are expected to be equally effective against the new variation.
The New York Times reported that on Saturday the nation logged 291,000 new cases.
Johns Hopkins University provides the following graph of infections:
The positive test rate remains far above the level experienced during the summer.
Source: Johns Hopkins University
The virus is threatening to overwhelm our health care system. There now over 120,000 people hospitalized with the virus.
Hospitals are confronting staffing shortages, medical supply deficiencies and bed capacity constraints.
We are losing a staggering number of our citizens to this virus. There have been 3,000 or more deaths on numerous days over the past few months. More than we lost in the 9/11 terror attacks nearly 20 years ago. The image below shows the daily death count.
The Institute for Health Metrics and Evaluation (IHME) at the University of Washington projects that a total of between 518,000 and 731,000 American will die from the virus by April 1, 2021. The variance is driven by mask usage, vaccinations, and other containment strategies.
If you want to see this data since October 1:
In addition to the vaccines by Pfizer/BioNTech and Moderna, we learned last week that another from Novavax is the fifth candidate to reach final-stage testing in the U.S. Also, Britain authorized a vaccine from the University of Oxford and the British-Swedish pharmaceutical company AstraZeneca. This new vaccine is cheaper, easier to transport, but also not as effective as those already in distribution.
The Trump Administration indicate it would ship 20 million doses of the Pfizer and Moderna vaccines by the end of 2020. It is not clear that the Operation Warp Speed met this goal.
The number of vaccinations has fallen behind the pace the government indicated when it began distributing the Pfizer/BioNTech and Moderna doses.
Army General Gustave Perna, who is directing the vaccine distribution under Operation Warp Speed, apologized in December for “miscommunication” surrounding the rollout.
The Labor Market
The number of Americans applying for unemployment benefits fell to 787,000 for the week ending December 26. The Labor Department numbers are not necessarily indicative of the job market, because the holidays and anticipation of more federal aid for works probably suppressed filings.
The total number of people receiving traditional unemployment benefits fell by 103,000 to 5.2 million for the week ending December 19. This is down significantly from the peak of 25.9 million in May.
The number of workers on the Pandemic Unemployment Assistance program, which provides benefits for the self-employed and gig workers not usually eligible for unemployment benefits, fell from 5.4 million to 5.1 million for the week ending December 12. The number of people on the Pandemic Emergency Assistance program, which provides up to 13 weeks of additional benefits for individuals who have exhausted their regular state benefits, fell to 4.8 million. These programs will be extended under the new federal program passed by Congress and signed by President Trump.
The total number of Americans receiving unemployment aid was 19.6 million for the week ending December 12, down almost 800,000 from the prior week. The unemployment rate was 6.7% for the month of November.
Federal Economic Relief
After President Trump reluctantly signed the $900 billion coronavirus economic relief package, Congress took up his call for larger payments to Americans. The House approved $2,000 in stimulus payments for millions of Americans. The payment amount in the bill the President signed was $600.
However, the Senate has yet to take up the matter. It will likely go nowhere. Several key Republican Senators believe additional financial aid for Americans should be more targeted to those truly in need. However, once Joe Biden takes office later in this month, he is expected to push Congress to pass additional support for struggling people and businesses.
The Bottom Line
It’s all about the virus and the vaccines. We need to get the highly effective vaccines distributed quickly and we need the vast majority of Americans to take it. Only when most of are vaccinated can life return to normal.
Keep the faith, be safe, and stay healthy.
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