Key Takeaways

  • Wednesday Jan. 20, 2021, Joe Biden is inaugurated as the 46th President of the United States.
  • Earnings season continues with Bank of America (BAC) and Netflix (NFLX)
  • Initial jobless claims spiked last Thursday, keep an eye on next week's numbers to see if it was an anomaly or the possible start of a trend.

Stocks ended the week down after a two pieces of substantial economic bad news in a row. On Thursday, initial unemployment claims hit the highest level in months, more on that below. Then on Friday, retail sales for the all-important holiday month of December fell 0.7% from November. President-elect Biden's "American Rescue Plan," which he revealed Friday, did not manage to perk up markets up.

Only four of the 11 S&P sectors had positive returns for the week, with energy, utilities, and real estate all up by more than a percent, while financials squeaked a return of 0.03%. Energy did the best, rising again this week, with the benchmark XLE ETF returning 2.8% for the week as oil prices rose this week.

The weakest sector was communications services. The benchmark XLC ETF returned -3.2% for the week. A major driven of this drop was the precipitous fall of Facebook (FB) and Twitter (TWTR) stock, which fell by -6.1% and -12.1% this week, respectively, as they were consumed by controversy after shutting down President Trump's accounts on their services.

1-Week Returns for S&P 500, Energy Sector, Communications Sector, Facebook, and Twitter.
Source: YCharts.

This week we're looking at the inauguration of President Joe Biden, earnings from big banks and Netflix, and initial unemployment numbers. But first, let's see how different asset classes have been doing.

Events Next Week

Sunday, January 17:

  • Chinese Gross Domestic Product (GDP) (Q4)
  • Chinese Industrial Production (December)

Monday, January 18:

  • Markets Closed in the U.S. for Martin Luther King Jr. Day
  • Italian Consumer Price Index (CPI) (December)
  • Canadian Housing Starts (December)

Tuesday, January 19:

Wednesday, January 20:

  • Joe Biden Is Inaugurated as President of the United States
  • U.K. CPI (December)
  • German Producer Price Index (PPI) (December)
  • Eurozone CPI (December)
  • Canadian Core CPI (December)
  • Bank of Canada Interest Rate Decision and Monetary Policy Report
  • Brazilian Central Bank Interest Rate Decision
  • Japanese Trade Balance (December)

Thursday, January 21:

  • European Central Bank (ECB) Interest Rate Decision
  • U.S. Weekly Initial Jobless Claims
  • U.S. Building Permits (December)
  • U.S. Housing Starts (December)
  • Philadelphia Federal Reserve Manufacturing Index (January)
  • Bank of Japan Monetary Policy Statement and Interest Rate Decision
  • Japanese National Core CPI (December)

Friday, January 22:

  • U.K. Retail Sales (December)
  • U.K Preliminary Manufacturing, Composite, and Services PMI (January)
  • Eurozone Preliminary Manufacturing, Composite, and Services PMI (January)
  • German Preliminary Manufacturing and Services Purchasing Managers' Indexes (PMIs) (January)
  • French Preliminary Manufacturing and Services PMI (January)
  • Canadian Core Retail Sales (November)

Joe Biden Inaugerated

On January 20, 2021, Joe Biden will be inaugurated as the 46th President of the United States. Biden has already announced a substantial new stimulus package, which he's called the "American Rescue Plan." This $1.9 trillion stimulus package is meant to be a continuation of the $900 billion package passed at the end of last year. Democrats will control both Houses of Congress when Biden takes office, no doubt easing the passage of his policies. However, conservative Democratic Senators, such as Joe Manchin, who has expressed concern at more aggressive stimulus efforts, may make more left-leaning elements of his policy agenda difficult to pass.

Anyone looking to try and decode how Biden will act once he's in office would do well to look at his appointments, virtually all of whom he's announced in advance. Looking at key appointees such as secretaries of the Departments of Labor, Commerce, and Treasury can go a long way to seeing how Biden plans to implement campaign promises, which are often vague. Look at the table below to see our profiles of key appointees.

Biden Appointments
 Name   Title
Janet Yellen Secretary of the Treasury
Pete Buttigieg Secretary of Transportation
Michael Regan Head of the Environmental Protection Agency (EPA)
Marty Walsh Secretary of Labor
Cecilia Rouse Chairwoman of the Council of Economic Advisers (CEA)
Gary Gensler Chair of the Securities and Exchange Commission (SEC)
Brian Deese Director of the National Economic Council (NEC)
Katherine Tai U.S Trade Representative
Jennifer Granholm Secretary of Energy
Gina Raimondo Secretary of Commerce

Earnings Season Continues

Earnings season continues with the second half of big bank earnings next week. JPMorgan (JPM) and Wells Fargo (WFC) already reported this past week. JPM's trading desk continued to prop up the bank's earnings as interest rates have compressed net-interest margins, while Wells Fargo, just as through most of 2020, failed to keep up. Next week Bank of America (BAC) and Goldman Sachs (GS) report. Again, a trend throughout all these banks is that, with interest rates pushing up against 0%, banks have had to boost non-interest income to make up for it, and stock and bond trading has been one of the biggest ways to do that. So keep an eye on the results from the Goldman and BofA trading desks when they report this upcoming Tuesday.

Also reporting next Tuesday is Netflix. Despite the pandemic leaving people stuck at home, Netflix disappointed analysts' expectations substantially last quarter as more and more streaming services compete for viewers. Netflix has always have a PE ratio far above the market's average, and justifying that demands growth, so keep an eye on its global paid streaming subscriber count when it reports to see if it can continue to produce that growth as the streaming market gets evermore crowded.

Initial Jobless Claims: Anomaly or Trend?

This past Thursday, initial unemployment clams climbed to their highest level since August 2020. As the number of COVID-19 infections and deaths continues to reach new records and the rollout of the vaccine remains slow, it's clear that the economic recovery from this crisis will not be easy. Remember that you can't draw too many conclusions from one data point, so keep an extra-close eye on the weekly initial unemployment claims both next week, and for the subsequent few weeks, to see if this trend continues, or if this rise was a one-off event.