Markets ended up fading 1% last week. Are there lasting concerns or an underlying silver lining?
Monday
The week opened with a sputter as focus shifted to the never-ending saga that is Brexit. The EU insisted a deal is needed by Wednesday to prevent the UK from crashing out of the EU. Meanwhile the UK is indicated a deal needed to be done in hours not days to overt such an exit. Brexit has been ongoing since June 2016, deal or no deal, it is expected on 12/31/2020. The event has been all but forgotten in the year of the pandemic. Investor jitters indicate that it may end up being a no deal scenario.
Tuesday
Markets opened in the red again, however dug their way out of the hole, led by the Nasdaq. The opening weakness was likely related ongoing issues between the UK and the EU. Later, optimism came after the FDA confirmed the efficacy of the Pfizer vaccine. Also, the UK began inoculating people Tuesday which lifted sentiment.
Wednesday
Concerns over stimulus hurdles that still need to be surmounted caused marks to pause on Wednesday. The S&P 500 shed .79%, while the Nasdaq shed 1.94%. Additionally, causing concerns was a data breach at Pfizer, already the center of attention due to their vaccine work.
Thursday
Markets opened under stress Thursday morning as initial unemployment claims increased more than expected. Expectations were for 725K and they came in at 853K. The increase was not surprising as stay at home orders increase. Markets climbed out of the hole quickly, however, led by energy and financials.
Friday
Friday brought little change for markets with the S&P 500 down marginally on the day. Consumer sentiment expectations jumped to 81.4 from 76.9 in December. Muted market activity was to be expected as investors awaited FDA approval of the Pfizer vaccine through out the day. Also, Brexit talks continued to avoid an impasse as the UK imposed a deadline of Sunday the 13th.
Conclusion
In all, the S&P 500 fell .97% on the week. Several factors went into the drag on the week. Brexit is expected at the end of the month and no trade deal is in sight. If a no deal Brexit occurs, the trade situation would default to World Trade Organization (WTO) rules. A situation that would create layers of regulation, which neither side are prepared to put in place. Rising COVID cases has caused minimal market stress, however stricter lockdowns would likely cause volatility to increase. Lastly, while rising jobless claims are concerning, it is to be expected given the coronavirus increases we have seen. A stop gap stimulus measure to get the economy through the next three months is likely in order.
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