From High Anxiety to Record Highs - Adviser Investments

From High Anxiety to Record Highs

January 25, 2021

Please note: This update was prepared on Friday, January 22, 2021, before the market’s close.

In a short trading week filled with political pageantry, the major stock indexes closed at fresh highs on Wednesday and Thursday before giving back a bit on Friday, as investors reacted to news that COVID-19 vaccines are possibly less effective against variant strains of the virus.

The economic picture remains divergent. The number of workers filing for first-time unemployment assistance dropped slightly in the most recent week, but joblessness remains stubbornly high. Retailers sold less in December than in either of the prior two months, but still did better than one year ago. And quarterly earnings reports from big banks reflected the uneven economic recovery: Companies like Goldman Sachs and Morgan Stanley, with large investment banking and trading units, reported record revenue, while banks more reliant on consumer lending, like Bank of America and Wells Fargo, did not fare as well.

All this said, investors have had a good start to the year. On a total return basis, the Dow Jones Industrial Average is up 2.0% through Thursday, while the broader S&P 500 index is up 2.7%. The MSCI EAFE index, a measure of developed international stock markets, is up 2.9%. As of Thursday, the Bloomberg Barclays U.S. Aggregate Bond index’s yield stood at 1.18%, down from last week’s 1.21% but up from 1.12% at the end of 2020. The U.S. bond market has declined 0.8% this year.

Washington Returns to Tradition

The inauguration of President Joe Biden on Wednesday was marked by speeches, poems and a stirring rendition of the national anthem—in short, it fit the typical mold, signaling the return to a more traditional approach to executive-branch politics.

During his first two days in office, Biden signed a series of executive orders to promote mask wearing, streamline production of COVID-19 vaccines and otherwise curb the outbreak and mitigate its damage to the economy. He also put a $1.9 trillion pandemic relief plan on the table and hinted at an infrastructure proposal waiting in the wings. Wall Street’s response was to buy.

The reason seems clear: All of these moves are intended to support public health and boost economic recovery. With additional federal support for vaccine distribution and economic stimulus in the works, it’s hard not to feel optimistic about the economy’s prospects for an accelerated rebound. Accelerated market gains could follow as retail establishments reopen, travel takes off and life as we used to know it returns to some semblance of normalcy.

That said, we aren’t sporting rose-colored glasses. The biggest risk we see in 2021 is that the markets may have priced in too great of a recovery too soon, and a failure to meet or exceed expectations could turn disappointed traders bearish in a hurry. But if 2020 is a prologue to 2021, stimulus-borne bounce backs are still par for our economy’s and market’s course. 

Retail Sales—Better and Worse

It’s been a slow week for hard data, but one noteworthy stat is the December retail sales number. Spending collapsed last spring, but showed a classic v-shaped recovery toward year-end, bouncing back to new highs just as quickly. In fact, consumers are buying more stuff than they did a year ago. However, December spending slowed 0.7% from November, suggesting a bumpy path ahead until the pandemic is wrestled to the ground.

Stimulus checks will help, as will increased vaccinations. Because consumer spending makes up roughly two-thirds of our economy, we’re keeping a close eye on what people are actually doing with their dollars rather than what sentiment surveys say they’re doing.

Sources: U.S. Census Bureau, Adviser Investments.


Financial Planning Focus

Do You Have an Emergency Fund?

The cornerstone of a strong financial foundation is a solid emergency fund. When we’re building a financial plan, the first thing we determine is if there’s enough rainy-day savings to handle unforeseen emergencies.

An emergency fund is exactly what it sounds like: Money set aside for unexpected situations. Let’s face it, life throws us all a curveball on occasion. A roof may spring a leak, your car wears out, a family member needs emergency surgery or your job is eliminated.

The trouble is that we’re not always great at preparing for the unexpected. A survey by found 25% of Americans have less than three months of living expenses saved up, and 28% have no emergency savings at all. This means that for more than half the country, even a small wobble in their day-to-day finances could leave them in dire straits.

While no one can predict the future, we can prepare for it. A rainy-day fund should be easily and readily accessible. That doesn’t mean a cookie jar of cash, though. A simple checking account at a local bank with ATM access can be a great option. A money market account with check-writing privileges is another alternative.

Of course, you also need to determine how large an emergency fund should be. One longstanding rule of thumb is to keep six months of living expenses at the ready. Two-income households might consider budgeting for a minimum of three months of living expenses. High-spending households might need more.

Building up six months of expenses may seem daunting to clients. We believe in setting small, achievable goals: Start by saving just one month of expenses. Once that’s done, you  can begin working on other savings needs while continuing to build the fund.


Podcast: Insights From Our Research Team

This week, we coaxed the Adviser Investments research team away from their spreadsheets to share their seasoned insights on how the big-picture trends of 2021 are creating opportunity in the areas they focus on—and how it’s affecting our investment recommendations.

Chief Investment Officer Jim Lowell led the conversation as members of our team discussed, among other topics:

  • The importance of international diversification
  • Whether cryptocurrencies are an investment opportunity, or a bubble to avoid
  • How to carve out yield in the municipal bond market
  • Whether dividends can be an effective income source in a low-yield environment

The times may be uncertain, but a disciplined approach to investing and a sharp analytical mind can help cut through the clutter and uncover the opportunities that remain. Please click here to listen now! 

Register for Our Quarterly Webinar Today!

Register now for Adviser Investments’ First-Quarter Webinar, A Tale of Two Recoveries: Will Main Street Catch Up With Wall Street?, to be held Wednesday, January 27 at 4:30 p.m. (EST). Sign up here!

This interactive discussion will include our thinking on the markets and economy as they relate to the pandemic and elections. You’ll hear from Chairman Dan Wiener and Director of Research Jeff DeMaso, and have your questions answered by Chief Investment Officer Jim Lowell, along with other members of our investment team.

As we look ahead to what 2021 may bring, we believe that untapped opportunities remain for investors with well-diversified portfolios—and we’re eager to share our thinking with you.

Click here to send your questions in advance.

If you’re unable to make it to the live event, sign up here to receive an email with a link to the on-demand replay.

Strategy Activity Update

Please see below for a summary of the trades we executed over the week through Thursday and our current tactical strategy allocations.

Dividend Income 

No trades this week.

AIQ Tactical Global Growth

Sold Fidelity MSCI Communication Services ETF (FCOM). Bought iShares Core S&P 500 ETF (IVV).

AIQ Tactical Defensive Growth

No trades this week.

AIQ Tactical High Income

No trades this week.

AIQ Tactical Multi-Asset Income

No trades this week.

Adviser Investments’ Market Takeaways

You can find two new Market Takeaways videos on our website. Research Analyst Liz Laprade spoke about the rally in small-caps and Vice President Steve Johnson brings home a lesson he learned from his mom as he talks about reaching beyond your risk comfort zone in your portfolio.

Looking Ahead

Political pageantry gives way to green eyeshades next week with reads on home prices and sales, durable and capital goods orders, consumer spending, core inflation, GDP and a press conference with Fed Chair Jerome Powell.

As always, you can visit for our timely and ongoing investment commentary. In the meantime, all of us at Adviser Investments wish you a safe, sound and prosperous investment future.

About Adviser Investments

Adviser Investments is a full-service wealth management firm, offering investment managementfinancial and tax planningmanaged individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit or call 800-492-6868.

Please note: This update was prepared on Friday, January 22, 2021, before the market’s close.

This material is distributed for informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Purchases and sales of securities listed above represent all securities bought and sold in each strategy during the period stated. Each strategy’s portfolio generally includes more holdings in addition to the transactions listed above and in some cases the securities listed above may only represent a small portion of the particular strategy’s complete portfolio. Further, the securities listed above are not selected for listing based on their investment performance; thus it should not be assumed that any of the securities listed above were profitable or will be profitable, nor should it be assumed that future recommendations will be profitable. Clients and prospective clients should only make judgements about a strategy’s performance after reviewing the strategy’s composite performance information. There is no assurance that each security listed above will remain in the strategy’s portfolio by the time you have received or read this email. Securities are listed for informational purposes and are not intended as recommendations. Existing investor accounts may not participate in all transactions listed above due to each account’s particular circumstances.

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