The U.S. economy is like a semi-trailer truck. No one likes being stuck behind a semi at a stoplight because big trucks don’t go from zero to 60 in 2.5 seconds. Neither does the U.S. economy.

When the pandemic brought our economy to a near virtual standstill early in 2020, the U.S. government and Federal Reserve (Fed) took extraordinary measures to help the economy get going again:

• Congress passed the CARES Act stimulus, which gave Americans and American businesses badly-needed fuel to support economic recovery. Businesses were able to stay open and people had money to spend. That’s important because consumer spending accounts for almost 70 percent of U.S. economic growth.
• The Federal Reserve paved the road and gave it a downward slope by creating a supportive interest rate environment and implementing special lending facilities intended to support businesses, as well as state and local governments. Some programs were funded by the CARES Act.

Government and central bank stimulus helped the American economy get going again.

Is slower growth ahead?
In recent weeks, however, there have been signs economic recovery may be losing momentum and the virus may, once again, be responsible.

Recently, the United States passed a grim milestone. The number of deaths attributed to COVID-19 surpassed 250,000. For perspective, that’s roughly equivalent to the population of Winston-Salem, North Carolina; Irving, Texas; or Buffalo, New York.

Last week, some economic data came in weaker than expected and initial unemployment claims ticked higher. Lucia Mutikani of Reuters reported:

“U.S. retail sales increased less than expected in October and could slow further, restrained by spiraling new COVID-19 infections and declining household income as millions of unemployed Americans lose government financial support…‘Fed officials are saying they might have to do more and today’s data may turn that thinking into a reality.’”

The Treasury curbs the Fed
The tools available to the Fed changed last week. The U.S. Treasury announced it will let several of the Fed’s Treasury-funded special lending programs expire at the end of 2020. Alexandra Scaggs of Barron’s reported the programs include:

• The Main Street Lending Program for small-to-mid-size businesses and non-profits
• The Municipal Liquidity Facility that lends directly to state and local governments
• Corporate Credit Facilities that purchase corporate bonds

For these programs to reopen in the future, Congress will need to appropriate new funds. One economist cited by CNBC said, “U.S. Treasury Secretary Steven Mnuchin’s decision to allow key pandemic relief programs to expire is like stripping the lifeboats from the Titanic.”

Not everyone agreed. “Programs like the municipal bond program and the Main Street Lending Program have not worked, in part because the Fed is a central bank. And when you demand that it take on fiscal government tasks…it does that very carefully, and, frankly, very badly,” explained an analyst interviewed on Marketplace Morning Report.

Despite changing monetary support, U.S. stock markets remained resilient. Ben Levisohn of Barron’s attributed the stock market’s resilience to positive vaccine news, which “…might not have pushed the stock market higher, but it sure was a reason not to sell.” Major indices finished the week slightly lower.

Disruption and innovation – Thanksgiving style.
Thanksgiving is going to be a lot different this year – and Americans are rising to the challenge. Some are cooking up their favorite recipes and peppering the table with screens so they can share the event from afar with friends and family members. Others are taking the opportunity to move away from turkey and introduce new entrees. No matter what will be on the table, people are finding opportunities to give and reasons to be grateful:

“In my neighborhood, we have decided to divide the Thanksgiving dinner up. Each neighbor participant makes something to share…We will package up our dishes in individual containers to be left on each neighbor’s porch at a determined time. The people who are having a difficult time getting by don’t have to contribute anything – neither do the veterans. We will all enjoy our meal in our separate homes but will definitely be grateful for the kindness and generosity of our neighbors and friends.”
–Sheryl Smetana, an Axios AM reader

“I’m going to have an amazing Thanksgiving all by myself,” Gabriel said. “I will sit on a park bench, and I will think about the great Thanksgivings that I’ve had in my life and be thankful for them. One bad Thanksgiving out of 63 amazing Thanksgivings – that’s pretty good odds. Maybe we should be a little more thankful for what we do have than constantly be complaining about what we don’t have.”
–Person at a food pantry, interviewed by CBS News

 “Everyone loves her father-in-law’s potato salad but the family cannot congregate this year to enjoy it…Walker says she resorted to desperate measures. “I reached out to him and asked whether we could maybe send the potato salad in the mail,” she confesses. Because no one wanted to add side servings of botulism to the holiday menu, Walker says, her father-in-law decided to tell everyone how to make the potato salad instead. Numerous long-coveted, heavily-guarded family recipes are being shared for the first time in 2020.”
–Cora Faith Walker, interviewed by NPR Weekend Edition Sunday

We hope you have a happy and safe Thanksgiving!

Weekly Focus – Think About It
“Give thanks for a little, and you will find a lot.”
–Hausa proverb

Investment advice offered through Research Financial Strategies, a registered investment advisor.
* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

Sources:
https://home.treasury.gov/policy-issues/cares
https://fred.stlouisfed.org/series/DPCERE1Q156NBEA
https://www.brookings.edu/research/fed-response-to-covid19/
https://fred.stlouisfed.org/series/GDP
https://www.reuters.com/article/us-usa-economy/u-s-retail-sales-lose-speed-as-pandemic-lack-of-fiscal-stimulus-weigh-idUSKBN27X1PC
https://coronavirus.jhu.edu
https://worldpopulationreview.com/us-cities
https://www.dol.gov/ui/data.pdf
https://www.barrons.com/articles/the-treasury-is-asking-the-fed-for-its-money-back-heres-what-it-means-for-markets-51605893511 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/11-23-20_Barrons-The_Treasury_is_Asking_the_Fed_for_Its_Money_Back-What_it_Means_for_Markets-Footnote_9.pdf)
https://www.cnbc.com/2020/11/20/weinberg-mnuchins-fed-move-is-like-stripping-titanic-of-its-lifeboats.html
https://www.marketplace.org/2020/11/20/mnuchin-moves-to-cut-off-fed-pandemic-emergency-lending-program/
https://www.barrons.com/articles/remember-the-fed-put-now-theres-the-vaccine-put-to-bolster-stocks-51605916806?refsec=economy-and-policy (or go to
https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/11-23-20_Barrons-The_Stock_Market_is_Getting_Support_from_a_Vaccine_Put-Heres_What_that_Means-Footnote_12.pdf)
https://www.barrons.com/market-data?mod=BOL_TOPNAV (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/11-23-20_Barrons-Market_Data-Footnote_13.pdf)
https://www.axios.com/newsletters/axios-am-019c54d0-e50a-41f9-8f88-22284fc78778.html
https://www.cbsnews.com/news/covid-19-pandemic-many-reflect-on-what-to-be-thankful-for/
https://www.npr.org/2020/11/22/934982793/how-to-plan-and-even-be-grateful-for-a-socially-distanced-thanksgiving
https://www.countryliving.com/food-drinks/g2059/thanksgiving-quotes/

Vaccine can be a powerful word. It’s worth 14 points in Scrabble (42 on a triple word square) and, last week, it was worth a whole lot more than that to financial markets.

On Monday, a pharmaceutical company and a biotech company announced preliminary trials of their vaccine show it may be 90 percent effective, reported Financial Times. The revelation conjured tantalizing visions of a future in which virus precautions are unnecessary and life returns to normal.

Around the world, pandemic-fatigued populations cheered and markets rallied. CNBC reported:

“The Dow was up nearly 3 percent, while Nasdaq fell 1.5 as laggard sectors like energy and financials outperformed tech. Stay-at-home plays…were sharply lower, but airlines rallied 16 percent. The S&P energy sector, still down 45 percent this year, was up more than 14 percent, and financials were up 8 percent.”

As demand for risk assets, like stocks, increased so did bond yields. In the United States, the yield on 10-year Treasuries rose to 0.97 percent. Rising long-term interest rates caused analysts to speculate about the possibility of inflation and stagflation (rising prices during a period of weak economic growth), reported Barron’s.

Mid-week, enthusiasm moderated. While investors remained confident a vaccine could lead to economic recovery over the longer term, concerns about the shorter-term took center stage. Markets retreated a bit as investors mulled:

·         Weaker-than-expected consumer sentiment. In November, consumer sentiment has declined by 5.9 percent month-to-month and it was off by more than 20 percent year-to-year. Sentiment is an important measure because consumer spending is a major driver of U.S. economic growth. When sentiment declines, people may spend less.

·         A surge in coronavirus cases. The number of daily cases has increased by more than 70 percent nationwide since the beginning of November. Eighteen states are at risk of reaching full hospital capacity, reported NPR.

 ·         New pandemic restrictions. As holidays approach, many cities and states introduced or re-introduced restrictions intended to slow the spread of the virus. The measures could slow economic recovery.

·         No progress on new stimulus. If good news about a vaccine throttles political appetite for additional stimulus, small business owners could be in trouble. In 2019, small businesses employed almost 60 million people – 47 percent of working Americans. A new Goldman Sachs survey found “…more than half of small business owners (52 percent) have stopped paying themselves in a bid to keep their businesses afloat and four in 10 (42 percent) already have begun laying off employees or cutting worker pay,” reported Axios.

Market volatility is likely to persist. Stay calm and don’t let short-term events jar you from your long-term financial goals.

Is value investing making a comeback?
In 1949, Benjamin Graham, who is known as the father of value investing, penned The Intelligent Investor. His book offered insights about how to reduce the risk of loss when investing in stocks.

Graham encouraged investors to understand a stock is more than a ticker symbol. Stockholders are owners of businesses that have underlying value, and that value does not depend on its stock price. He believed investors should purchase shares when a stock is trading below the underlying worth of the business. Value investing is all about looking for bargains, for diamonds in the rough.

Value investing is often discussed in tandem with growth investing.

Growth investors are less concerned about share price and more concerned about above-average earnings growth. They invest in companies that are expected to grow quickly and deliver impressive returns as a result of that growth.

Value investing has had a rough decade. Despite a long history of outperformance – from 1983 through 2019, the FTSE Russell 1000 Value Index outperformed the Russell 1000 Growth Index – value has underperformed since the 2008 financial crisis.

Last week, there was a move from growth-oriented stocks into value-oriented stocks. The Economist explained, “In the past week or so, fortunes have reversed. Technology stocks have sold off. Value stocks have rallied, as prospects for a coronavirus vaccine raise hopes of a quick return to a normal economy. This might be the start of a long-heralded rotation from overpriced tech to far cheaper cyclicals – stocks that do well in a strong economy. Perhaps value is back.”

Time will tell.

Weekly Focus – Think About It 
“The vaccine news airlines have been waiting for arrived this week, raising hopes for a recovery in passenger air travel – but only if the crippled industry can muster the resources to deliver billions of life-saving doses to the world…Just providing a single dose to the world’s 7.8 billion people would fill 8,000 747 freighter planes…”
–Joann Muller, Axios News, November 13, 2020

Investment advice offered through Research Financial Strategies, a registered investment advisor.
* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

Sources:
https://www.wordunscrambler.net/scrabble-word-meaning/vaccine
https://www.ft.com/content/48400214-6caf-4d88-b145-75a3cead2b23 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/11-16-20_FinancialTimes-COVID_Vaccine_Breakthrough_Fuels_Broad_Global_Equity_Rally-Footnote_2.pdf)
https://www.cnbc.com/2020/11/09/vaccine-news-unleashes-new-momentum-in-stock-market-as-hunkered-down-investors-flee-cash.html
https://www.cnbc.com/2020/11/09/us-bonds-treasury-yields-fall-following-bidens-election-win.html
https://www.cnbc.com/2020/11/12/stock-market-futures-open-to-close-news.html
https://www.barrons.com/articles/long-term-interest-rates-are-rising-could-that-spell-stagflation-51605315647 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/11-16-20_Barrons-Heres_What_the_Rise_in_Long-Term_Interest_Rates_Means-Footnote_6.pdf)
http://www.sca.isr.umich.edu
https://www.investopedia.com/terms/c/consumer-sentiment.asp
https://www.npr.org/sections/health-shots/2020/11/13/934566781/the-pandemic-this-week-8-things-to-know-about-the-surge
https://cdn.advocacy.sba.gov/wp-content/uploads/2019/04/23142719/2019-Small-Business-Profiles-US.pdf
https://www.axios.com/small-business-owners-uncertain-of-survival-without-new-stimulus-074535f7-9541-462b-bbfa-d4b9f75f3646.html
https://www.amazon.com/Intelligent-Investor-Collins-Business-Essentials-ebook/dp/B000FC12C8/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=&sr= (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/11-16-20_Book_Excerpt-The_Intelligent_Investor-Footnote_12.pdf)
https://www.investopedia.com/terms/g/growthinvesting.asp
https://russellinvestments.com/us/blog/value-and-growth
https://www.economist.com/briefing/2020/11/12/value-investing-is-struggling-to-remain-relevant (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/11-16-20_TheEconomist-Value_Investing_is_Struggling_to_Remain_Relevant-Footnote_15.pdf)
https://www.axios.com/covid-19-vaccine-airlines-distribution-020ed2ca-6387-490c-b357-4be27445360b.html