Vaccine Hopes Keep Investor Sentiment High December 14, 2020 Weekly Update Print Please note: This update was prepared on Friday, December 11, 2020, before the market’s close. Stocks were soaring this week until stalled stimulus talks in Washington threatened to upstage the news we’ve all been waiting for: FDA authorization to roll out a COVID-19 vaccine. Whether it’s stimulus or vaccines, the same issues apply—approval and distribution. News reports Friday morning suggested that while stimulus talks were at a standstill, approval of Pfizer’s vaccine was imminent. Through Thursday, the Dow Jones Industrial Average was up 7.5% for the year, while the broader S&P 500 index was up 15.5%. The MSCI EAFE index, a measure of developed international stock markets, has returned 5.4%. As of Thursday, the Bloomberg Barclays U.S. Aggregate Bond index’s yield stood at 1.18%, down from 2.31% at the end of 2019. On a total return basis, the U.S. bond market has gained 7.1% this year. Traders Dream of a Vaccinated Christmas Medical news moved markets this week. Increasing certainty that a vaccine is on the way gave the Dow and the S&P 500 a shot in the arm; both set record highs on Tuesday. Is this exuberance justified? We think so. Despite scant new economic data to look at this week, we remain convinced that the U.S. is in a slow-recovery, not no-recovery mode. But, as we’ve also been noting in recent weeks, more stimulus may be required to keep the recovery going, and it’s not clear whether Congress will get its act together to provide it any time soon. We do know that vaccines and stimulus will be two of the most important factors determining how 2021 unfolds. Clearly, with stock markets at or near all-time highs, investors and traders are anticipating a spending recovery and, by extension, an earnings recovery early next year. Economists, too, have been increasingly upbeat: Vanguard’s team issued its annual economic predictions for 2021 and is projecting that the U.S. economy will grow 5% next year—a 25% increase from what they were expecting just a couple of months ago. Of course, if 2020’s pandemic taught us anything about the veracity of predictions, it’s that it only takes one exogenous event to make all of Wall Street’s myriad outlooks and forecasts appear utterly ridiculous. Tesla’s Entry to the S&P 500: Too Late? In news that many investors had been clamoring for all year, the committee that determines which stocks are in and which stocks are out of the S&P 500 index finally gave Tesla the thumbs-up. In the past, the electric-car company’s lack of consistent profits blocked it from consideration. But with Tesla reporting its fourth consecutive quarter of profitability in July, the venerable index’s overseers finally gave in. Tesla’s first trading day as part of the S&P 500 is set for December 21. While the committee hemmed and hawed and waited for Tesla’s earnings to cross a certain threshold, shareholders in index funds and ETFs tied to the S&P 500 missed out on the stock’s more-than-600% gain this year. Other funds and ETFs tracking indexes that already included Tesla outperformed the S&P in 2020. For instance, Vanguard’s LargeCap Index fund and Russell 1000 ETF both held Tesla all year and are up 18.1% and 17.9%, respectively, compared to the company’s 500 Index, which is up 15.5%. To be clear, the inclusion of Tesla isn’t the only difference between the S&P and the indexes underlying the other two Vanguard funds. For example, both funds also hold teleconference provider Zoom, which is absent from the S&P and is having a blockbuster year as well. We know there will always be some differences in performance among various large-stock indexes and the funds that track them. But it seems clear that the committee’s decisions to exclude Tesla and Zoom resulted in some underperformance for the S&P 500 this year. Financial Planning Focus: 5 Financial Tips for New Parents Major life events are often the impetus to begin comprehensive financial planning—and few events are bigger than welcoming a new child. Most people have not accounted for children in their financial plan before they have their first, so the happy event is also the perfect time to reassess your plan (or create a new one). Here are five action items to consider whether you are expecting, have just brought your newborn home or are playing catch-up: Get your child a Social Security number. You’ll need this to add your child to your health insurance, claim them as a dependent on your taxes or to establish a college savings account in their name. Your hospital should provide you with the necessary paperwork for a newborn. For adoptees, your adoption agency should be able to help. Add your baby to your health insurance. In all the excitement and stress that comes with growing your family, you won’t want to forget this one. Once your baby is born, you have a 30-day window to add the little one to your health insurance coverage. Notify your employer’s HR department or your insurer as soon as possible. Review your other insurance coverage. Even if you already have life and disability insurance, you may need to update those policies. Disability insurance can help replace at least a portion of your salary if you are unable to work, and life insurance can provide for your loved ones’ futures if the unthinkable happens. Begin budgeting (if you haven’t already). Baby budgeting means more than just adding diapers to the grocery list. Insurance, clothing, child care and education are among the other expenses that factor in. Consider saving for your child’s future education with a tax-free 529 plan. Finally, be sure you continue making regular contributions to your retirement and investment accounts. Here’s our Budget Worksheet to get you started. Update your estate plan. As noted above, most new parents don’t have an estate plan that incorporates children before their first-born arrives. Because you’ll want your child to be well cared for if something unexpected were to happen to you, you’ll need to update your will to reflect your wishes, designate a guardian and leave clear instructions for your child’s inheritance. After your baby is born, you’ll also want to consider updating your beneficiary designations to include your child on your various financial accounts. This list is by no means exhaustive; for more, please read our Financial Checklist for New Parents. 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 Increased JP Morgan (JPM); Bank of America (BAC). Reduced Cash. AIQ Tactical Global Growth Sold iShares MSCI Japan Small-Cap ETF (SCJ). Bought iShares MSCI Eurozone ETF (EZU). AIQ Tactical Defensive Growth No trades this week. AIQ Tactical High Income No trades this week. AIQ Tactical Multi-Asset Sold Vanguard Global ex-U.S. Real Estate ETF (VNQI). Bought iShares Mortgage Real Estate ETF (REM). Adviser Investments’ Market Takeaways You can find two new Market Takeaways videos on our website. Research Analyst Liz Laprade discusses whether the surge in IPOs means the market’s in bubble territory, and Vice President Steve Johnson shines a light on how bitcoin has become regarded as an alternative to gold and the dollar. Looking Ahead Next week brings a plethora of new economic data, including manufacturing and service sector indicators; reports on housing starts, permits and home builders’ sentiment; industrial production; retail sales; business inventories; leading economic indicators and a press conference by Federal Reserve Chair Jerome Powell. And, of course, we will also be looking ahead to the latest jobless claims. As always, you can visit www.adviserinvestments.com 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 and a very happy Hanukkah to everyone celebrating this year. About Adviser Investments Adviser Investments is a full-service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994, and have more than 3,500 clients across the country and over $7 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. Our minimum account size is $350,000. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868. Please note: This update was prepared on Friday, December 11, 2020, 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. 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