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Growth Stocks Lead Market Advance; Earnings Season in Full Force Thumbnail

Growth Stocks Lead Market Advance; Earnings Season in Full Force

The Dow (+0.6%), NASDAQ (+4.6%) and S&P 500 (+2.0%) all advanced last week, as the tech-heavy NASDAQ and growth companies led the charge, continuing their rally from 2020.  In fact, the growth stock index advanced over 4% last week, while the value stock index declined fractionally.  Meanwhile, taxable bonds edged slightly higher (about 0.1%) and tax-free muni bonds continued their strong recovery, gaining about 0.2% for the week (and almost 1% YTD). 


Markets don’t like uncertainty, so the elections are now firmly behind us, removing the stress associated with that particular unknown.  Thus, that allows investors to focus their attention on more important things such as corporate earnings  and the (hopeful) slowdown of the pandemic with the widespread administering of vaccines.  The fourth quarter earnings season is now in full swing, and while only a small amount of data has been reported, FactSet reports that 86% of companies have exceeded their estimates, which is well above the 5-year average of 74%.  Corporate earnings is where the rubber meets the road, so improvement in that area is a sign of a healthier economy which leads to a stronger stock market, albeit a future tax increase could damper that excitement.  For now, let’s just get that darn COVID behind us and start our recovery toward being “normal” again.


For those that didn’t notice, we implemented our across-the-board portfolio rebalancing last week.  That was intended for a couple weeks ago, but given the concern for possible political tension and riots, we intentionally waited until after the inauguration to make the changes.  In short, we brought the portfolios back to “fully invested” to their appropriate risk level, and also increased our exposure to emerging markets, small caps, and other asset classes we felt would outperform the overall markets in 2021.


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