Weekly Market Commentary

Gradient Investments Weekly Talking Points 01/25/2021

All data is for the week ended January 22, 2021.

Stocks

Markets were higher last week with a definite emphasis on growth stocks. The S&P 500 rose 1.96%, the Russell 2000 added 2.15% and the NASDAQ advanced 4.19%. Overseas, the emerging markets (MSCI EM) rose 2.57% while international developed markets (MSCI EAFE) edged up 0.70%. Communications services and technology were the best performing sectors while financials and energy were the laggards.1

Fixed Income

Interest rates and bond values were virtually flat for the week with the benchmark 10-year treasuries ending with a 1.10% yield.

Commodities

Lumber prices are down 20% year-to-date after climbing 115% last year. Once COVID-19 became widespread, lumber production declined last year. This occurred at the same time that demand from both new housing starts and the repair and remodel sector rose significantly, pressuring lumber pressure prices higher in 2020. With supplies now more in balance with demand and an outlook for further supply increases, lumber prices are falling.3

Economic Data

Weekly initial jobless claims were higher than expected at 900,000 and the prior week’s report was revised upward. Initial claims remain significantly above average and help validate calls for further jobless assistance from the government.4

Low mortgage interest rates drove housing starts to 1.67 million in December, well ahead of the 1.56 consensus expectations. Likewise building permits were well ahead of expectations at 1.71 million. The key takeaway from the report is that the growth was driven entirely by single-unit dwellings.5

Company News6

AeroVironment (AVAV), a G33 holding, increased 14.2% last week following the announcement of an acquisition of a drone manufacturer for the defense industry, adding key services to AVAV’s current offerings. The deal is expected to propel AVAV’s total growth rate higher.7

eHealth (EHTH), a G33 and Contrarian Choice holding, rose 12.2% last week on expectations that it would benefit from a larger role for its Medicare Advantage business under the new Biden administration.8

Netflix (NFLX), a G33 and Core Select holding, reported revenues, operating margins and earnings that were ahead of expectations and its robust subscription growth of 22% helped drive the stock price 13.5% higher last week. 9