Mittens from Vermont

Orders from DC 

Upon his inauguration, President Biden signed 10 executive orders specifically to combat the pandemic. His plans include the intent to use the Defense Production Act (also enacted by the Trump administration for the production of ventilators and other supplies) to produce protective equipment and supplies for testing and vaccinations. The new administration is going to look to accelerate the roll-out of vaccines (100m doses in his first 100 days) by providing more funding for state and local officials and mobilizing FEMA resources to make it happen. 

Moral of the story: It’s abundantly clear the real economic recovery is going to happen in lockstep with our ability to control the spread of the virus. To that end, I’m looking forward to the progress we see (hopefully) from the actions of the new administration. 

Earnings from Wall Street 

About 13% of the S&P 500 companies have reported earnings so far and, of them, 86% have reported numbers above expectations. They’re beating expectations by 22.4% on average (this is usually much lower, closer to 6%). We saw positive surprises from the financials that generally report first (JP Morgan, Goldman Sachs, Citigroup, Morgan Stanley) and a few big-name tech companies (Netflix).

Moral of the story: Based on the earnings that have been reported so far and expectations for the rest of earnings, the S&P 500 is expected to post a year-over-year decline in earnings of -4.7%. This compares to expectations of -9.2% just a few weeks ago, so the momentum seems promising. The biggest laggards are expected to be energy, industrial, and consumer discretionary companies. If a 4.7% decline in earnings ends up being the number at the end, it would be the fifth largest annual decline since 2009. Despite this, the index continues to reach new highs…

Unemployment from…unfortunately everywhere 

New unemployment claims came in at 900k last week, slightly below expectations for 925k, and a mild improvement compared to the prior week’s 926k. Continuing claims also fell slightly to 5.05m. There has been some disruption in the distribution of unemployment benefits from COVID-related federal aid packages as old programs expired and new programs have been slowly rolling out. Even then, there are about 16m people receiving those benefits. 

Moral of the story: The market didn’t really react much to this report in the middle of the excitement for another large stimulus plan from the Biden administration in the near future. 

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