Last Week in Review: Three Market Movers This Past Week
1) Stimulus Talks Are Back
The big news this past week was the renewed stimulus talks and the "chance" that we may see a $900 billion stimulus bill included in the government funding package this month.
Up until now, both political parties have been unable to agree on a stimulus package. In addition to the political pressure on both sides to come to an agreement, there are two deadlines Congress has "chances" to get this deal done.
By December 11, Congress must come to an agreement on a funding bill to avoid a government shutdown. As mentioned, we may see a stimulus package included in this funding measure.
If Congress misses this window, they have until December 21 before Congress goes on recess until year-end.
Stocks and rates have been behaving like a deal will get done with both moving higher.
2) Vaccines on the Way
Markets are forward-looking and both Stocks and rates have been rising on hopes and optimism that mass vaccine distribution is just around the corner.
In addition to several vaccines already showing high efficacy rates, there are many more vaccines and therapeutics in the pipeline. Continued good news from vaccines and therapeutics will be a tailwind for Stocks and rates, pushing them higher. The opposite is also true.
3) COVID-19 Cases on the Rise
The rise in COVID-19 cases, hospitalizations, and deaths is a major concern. Even though markets are forward-looking, the uncertainty and threat of more shutdowns is limiting the rise in Stocks and rates. The tug-of-war between vaccine hopes, rising cases, and uncertainty will continue to be a major driver for the next few months. Remember what Fed Chair Powell said back in July, "The path of the economy will depend significantly on the course of the virus." This statement has aged well several months later.
Bottom line: Rates remain right at historic lows, per Freddie Mac this week. With a vaccine and more stimulus on the way, it may be difficult to see rates improve much -- if at all.
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