Good morning, and welcome to the holiday-shortened week. Due to the observance of Martin Luther King birthday, the markets were closed on Monday, subsequently delaying this correspondence by a day.
The Dow (-0.9%), NASDAQ (-1.5%) and S&P 500 (-1.5%) were all down last week in a relatively light week of trading. Meanwhile, taxable and tax-free muni bonds edged slightly higher last week, gaining roughly 0.1% - 0.2%. Activity was relatively light last week, possibly while investors may have expressed concern over political shake up that never materialized. That cautious mentality will likely persist until after the inauguration, which is scheduled to occur on Wednesday. I agree – let’s just get through these politics and move on.
President Biden has announced a proposal for a $1.9 trillion stimulus package, far surpassing any stimulus package that was proposed that had any chance of passing. With a one-party Washington, most pundits believed that larger stimulus packages could get passed, and this should be welcomed nicely by the markets. Meanwhile, it is also widely believed that any large tax reform bill won’t occur until much later into 2021, or even until 2022. This week also marks the beginning of earnings season, as corporate earnings are projected to be about 6.8% lower than the 4th quarter of the prior year, the last quarterly earning prior to the pandemic.