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2020 has been a trying year. The COVID19 outbreak and ensuing pandemic have created a global health catastrophe. Furthermore, the social aspects in response to COVID19 have also been profound. In the United States, the virus was compounded by justice issues, resulting in peaceful protests and riots in multiple cities. All of this happened before the year was halfway over.
The second half of the year seemed to be devoted to the Presidential election in the U.S. With all of these elements, many have wished that 2020 would disappear. However, for traders, 2020 presented unprecedented volatility, especially early in the year. Many benefited from this price action.
Whatever your feelings are about 2020, the fact is, we are now in December, staring down the close of this year. This article will look at some items relevant to traders this month as we look forward to New Years Day.
As the flu season is coming into order, the COVID19 cases once again spiking. It’s important to note two things; first, there is much more testing than six months ago. Therefore we might expect that there would be more cases reported. Secondly, while cases climb, the death counts are now equally elevated. Don’t get me wrong; I realize that the death counts are at the highest levels; however, overall, the ratio of deaths to active cases is falling. This suggests that those getting tested are doing so more for precautionary reasons; meanwhile, the hospitals’ responsive treatments are likely more effective than earlier in the year. No matter how we may dissect it, we must still be conscientious of the rise of cases because if the markets decide that the spike in cases matter, then there will be volatility.
What matters to the markets are the economic effects of COVID19. In some U.S. states, new restrictions have been put in place in recent weeks due to increased virus momentum. It’s reasonable to expect that job creation will flatline, at the very best, until this pandemic is closer to being solved. Furthermore, as new cases arise, there is the risk of another spike of jobless claims. Perhaps most worthy of interest will be how holiday shopping is affected, as we are now in December.
Before the election, there was greater anticipation of a potential stimulus approved by Congress and signed by the White House. Of course, since the election, there have been more pressing headlines that are dominating the political scene. With the gift-buying season upon us, it would seem pertinent to pass the stimulus to assist retail. However, even if a stimulus bill does pass, it will be too late to likely have much of an effect on Christmas. Either way, if momentum can increase on a stimulus plan, then the markets may respond accordingly. However, I wouldn’t expect a relief bill to give any sustained momentum to the markets.
Fortunately, there has been plenty of positive news in recent days and weeks regarding a vaccination that may soon be available to critical persons in the new year. With each dose of positive news, the markets have taken a “risk-on” posture. Once the additional layers of regulatory red tape have been surpassed, there stands the first real hope of eradicating this pandemic.
There was concern a month ago that Biden would stack his cabinet with far-left policymakers, thus creating more significant problems for the markets. However, at this point, it seems that Biden’s advisors come from mostly a center-left background, perhaps even easing the market’s concerns. When will there be more indication of what Biden prioritizes upon assuming the presidency? These indications could have a great effect on many many equity sectors.
On January 5th, 2021, Georgians will hold a vote for both of their Senate seats. A few months ago, nobody would have thought that these seats would be contested, but welcome to the new world where a Democrat would win Georgia for the first time since 1992. If the Democrats are somehow able to win this seat, it places the Republican majority as razor-thin and in jeopardy of a lesser path of resistance toward Biden’s policies. The current polling suggests that these races will be close. The question becomes, how much will polling and speculation of the results affect the markets leading up to election day in Georgia?
While all of these elements could play a role in market behavior in this final month of the year, the one to have the most significant impact is likely to be the COVID19 vaccination. If there is a delay in the vaccine for some reason, I expect a sudden market reaction. Traders should pay attention to all these variables as they develop in the days and weeks to come.
Perhaps you have additional items that you find significant to watch this month; if so, please leave your comments in the section below. Trade Well!
