Fun Facts about December
- Birthstone: Turquoise, zircon, or tanzanite
- Flower: Narcissus or Holly
- Zodiac signs: Sagittarius or Capricorn
- December was originally the tenth month of the year in the Roman calendar. It gets its name from the Latin word “decem” which means tenth. However, when the Romans added January and February to the calendar, it became the twelfth month.
- It is the first month of winter and the last month of the year.
- National Cookie Day is December 4th.
- The first day of Winter is on either December 21st. This is the shortest day of the year and the longest night. It is called the Winter or Southern solstice in the Northern Hemisphere.
Stocks bounced back smartly in November, chalking up one of its best performances for the month in decades. The S&P 500 index rose almost 11% for the month of November and now sits at a positive 12.5% for 2020.
There were a couple of reasons for the surge. The big one was the positive news coming out of the vaccine front. The other was the outcome of the elections, where the results were already factored into the stock market for the most part.
The kickoff to the holiday shopping season on Black Friday was met with very little consumer enthusiasm as compared to the past, to the surprise of absolutely nobody. With that said, there are early indications that online shopping was robust during the same period. The big question is will it be enough to offset the brick and mortar buying that has been thwarted by the pandemic this year.
Take a look at the Outlook section below to see what events could move the markets over the short term.
Bond prices rose slightly across the board. I believe this price rise can be attributed to the increase in Covid cases and the subsequent restrictions by municipalities across the country to curb them. If you are a bond buyer, try and keep your bond maturities short, no more than 2 years, to reign in the risk in this abnormal environment.
The 10-year US Treasury note is yielding 0.84% and the 30 year is at 1.57%, both lower from last month. After they had an initial spike after the elections in the first week in November, they drifted lower the rest of the month.
Interest rates continued to trend lower this past month once again. They followed the same pattern as last month: a quick rise in the early part of the month and then drifted lower the rest of the month. These extremely low rates are great for borrowers but just horrible for savers.
On the savings side, short-term rates, like savings and money market accounts, as well as longer-term rates, like CDs, all trended lower once again as the pandemic continues to surge unchecked in the United States.
Currently, the average savings account is paying 0.33%, the same as a month ago. Although it is safe, it’s not the place to put all of your retirement savings, that’s for sure.
The 1-year CD interest rate is now averaging 0.52%, lower than the 0.54% it was yielding a month ago. The 5-year CD rate is tracking lower as well, now at 0.71% from 0.73%. As of September 2020, the average savings rate across the U.S. is still way above average at 14.3%, but much lower than the high it reached in April of 34%. This makes sense since the federal stimulus is gone, layoffs have become permanent, and businesses have permanently closed. Still, the money saved by staying home is keeping this savings rate elevated for the time being.
Mortgage rates have pushed down against their all-time lows once again. Currently, the 30-year rate is at 2.92%, down from 3.01% a month ago. The Fed flooding the market with liquidity plus worries of a stalled economic recovery are helping to keep these rates extremely low, particularly for the variable rate mortgage loans. It is definitely a seller’s market in the housing sector as these low rates are enticing first time homebuyers as well as city workers moving out to the burbs due to work-at-home mandates.
Oil prices halted their 2-month slide to make some nice gains in November. This was mostly due to OPEC countries looking to curb output even more to help support prices as the world shuts down again due to a surge in Covid cases.
Oil shot up about 27% for the month. Oil prices in the U.S. are still down 26% for the year.
Gasoline prices did not mirror the sharp rise in oil prices. Prices at the pump are averaging about $2.13 per gallon, a penny lower than a month ago. Demand for diesel has been rising, though, as more goods are being moved throughout the country as buying picks up for the holidays. Missouri has the cheapest fuel, at $1.77. FYI, a year ago, we were paying $2.59.
Check out the prices at the pump in your area: Gas Buddy.
Outlook
Events on the horizon that could move the markets in the near term:
- Election: It’s over, finally. Democrats will be taking over the Executive branch and still have a slim majority in the House of Representatives. We still have a couple of senate races in Georgia that will determine which party will be the majority in the Senate. If the republicans keep the Senate, I think the markets will like that balance of power. If the democrats take over the Senate, there is a better chance of things actually getting done in Congress, which may or may not be good for stocks over the next few months.
- Coronavirus: In my update last month, I talked about how the death rate has been slowly decreasing. Well, that is no longer the case. The death rate had, unfortunately, slowly climbed throughout November to well over 1,000 deaths per day in the U.S.. I use this site to track these types of Covid trends: https://bing.com/covid. The great news is that vaccine approvals are coming soon. You can track where we are in this process here: https://www.nytimes.com/interactive/2020/science/coronavirus-vaccine-tracker.html. I think a vaccine approval has already been priced in to the stock market, as evidenced by the large gains in the major market indices in November.
- Stimulus Bill: Congress comes back to work this week (where were they?) to try and get another stimulus package together to help Americans as the country shuts back down to try and curb the increasing rates of hospitalizations and deaths due to the pandemic. The House of Representatives has 9 official in-session days and the Senate 14 days before both chambers break for the new year. Even with this short of a timeframe, Congress is expected to work overtime, including weekends, in the effort to get a deal done. I would hope that they would do whatever it takes to get a check in the mail to people that desperately need it. This will be a positive for stocks if Congress can make it happen.
- Trade Wars/Tariffs: With a new administration coming into the White House, there is a good chance that the tariffs imposed on our imports will be removed, thus lowering U.S. companies’ costs, which will help them stay in business. This would give markets a nice bump.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
