January Investment Bulletin

Bill Norris

January 04, 2021

Stay current on what’s happening in the economy to help you better understand how the financial news relates to your investments.

December key drivers

As we have seen for much of the latter part of 2020, markets moved higher in December despite the continued surge in the virus and the ongoing impact on the global economy. Boosted  by optimism of “turning the corner” on the virus, the S&P 500 gained close to 4% during the month, while the Russell 2000 Index rose more than 8%. Outside of the US, emerging markets gained 7%, as measured by the MSCI EM Index. The final quarter of the year was quite strong, particularly for US small caps and MLPs. Overall, global equity markets performed quite well in 2020.

The key news in December focused on the emergency approval of two vaccine candidates by the FDA in the US and limited approval in other countries around the globe. While a lot of this news had already been priced into equity markets, the final approval and rollout in the US helped to shift investor focus on the future and how the economy should respond as we see broader vaccinations in 2021.

Throughout much of December, Congress was trying to agree on the final details of another fiscal spending package. With negotiations focused on getting additional funds into the hands of consumers and extending unemployment benefits into 2021, markets responded favorably as recent economic data has been quite weak. The final $900 billion estimated package passed through both houses of Congress late in December and was finally signed by the President after Christmas.

What to watch in January

The final stage of the 2020 general election took place on January 5 with Georgia’s two Senate runoffs. As of January 6, one Senate seat was confirmed blue; the other is too close      to call with a slim Democratic lead. The final outcome could either provide the incoming administration with a deciding    vote to move ahead on an aggressive fiscal spending plan or leave us with what we have had for the past two years—gridlock. Investors will be closely watching to see how the results play out.

Q4 2020 earnings season kicks off during the second full week of January. As of December 18, according to FactSet, earnings are expected to decline approximately 9% for companies in the S&P 500, which is slightly better than what was projected as    of September 30. With valuations at very high levels and uncertainty around the strength of the economy in the short-run, markets will be very sensitive to results, as well as to forward guidance for 2021.

In late January, we will get our first look at Q4 2020 GDP growth estimates for the US economy. According to the Atlanta Fed GDP tracker, current estimates put growth at just slightly above 10%. However, the current consensus estimates from Blue Chip Economics suggest a much slower growth rate of less than 4%. The fiscal stimulus bill approved by Congress late in December will not have an impact until early 2021, and the delay in approving the plan may have impacted consumer spending in Q4, and therefore, GDP growth.

Global asset class total returns through 12.31.2020

Global asset class total returns through 12.31.2020


Bill Norris is chief investment officer and head of asset management for CIBC Bank USA. In this role, he oversees investment management, trust and estate services to individual and institutional clients of CIBC Bank USA. Bill also serves as a member of CIBC Private Wealth Management’s Asset Allocation Committee with more than 35 years of industry experience.