We have an array of interesting data in the week ahead including inflation news, more employment numbers, and sentiment from consumers and small businesses. Most importantly we have the start of earnings season.
Despite this, the political story will dominate, at least for a bit longer. While this is newsworthy, it is not the key element for investors. What best depicts this challenge to find the right focus?
Let us turn to Chance the Gardener! The simple-minded gardener who knows only what he has learned on television is a fount of wisdom.
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We can enjoy two light weeks for economic reports. Both are holiday-shortened, implying lower volume but not necessarily lower volatility. Personal income and spending will be especially interesting, along with updated unemployment claims data. It is also an especially important time to monitor sentiment. The biggest reports are scheduled for the first week of 2021.
The calendar will prompt many to offer specific and complex forecasts for next year. Good luck with that! It is necessary for investors to think ahead, but dangerous to drive faster than you can see on a foggy road. A good approach to this is for investors to ask:
As you can see from the chart above, core control group ex grocery sales were stronger in the week leading up to Black Friday than last year. Remember, sales outperformed in October because of Prime Day and the subsequent discounts from competitors with Amazon. Sales weren’t as strong as last year after Black Friday. Spending will probably peak earlier (before Christmas) than last year because people can’t buy goods at the last minute online like they can in stores. Spending at stores won’t be prominent because of the virus.
Retail Traders Lead The Charge
People are discovering stock trading on a mass scale. It’s the hot new trend like how a consumer good/service becomes popular and fades. The brokerage apps are the Pokémon Go of 2020. Scarily, new traders have discovered weekly call options and triple leveraged ETFs. This isn’t a game. We think because it is easier than ever to invest and because people are stuck at home, they are trading themselves. It also helps that
We have another normal week for economic reports, featuring retail sales and housing data (NAHB Index, building permits, housing starts). Industrial production is from November, so it is a bit stale. Jobless claims continue to be a current and reasonably reliable indicator.
The economy remains secondary for market participants. It has been ignored for months, so why change now? Attention has mostly been on more fiscal stimulus, with daily market moves registering even small hints of progress. It is a symptom of a greater problem - a gridlocked government. Since investors can expect more of this in the years ahead, it is time to ask: