12.18.2020

As we approach the end of the year, the S&P 500 maintains a steady path higher. It closed the week just a hair below another all-time high. The market continues to fly in the face of weakening economic data and struggles in passing the second round of stimulus on Capitol Hill. Participants are still looking towards greener pastures with vaccines being administered and Congress actively trying to negotiate another deal. For now, the 800-pound gorilla in the room remains the level of fiscal and monetary stimulus in circulation. The fiscal side needs a boost, but the market is projecting confidence that it will get done.  

Yet, with a potential government shutdown looming, time is starting to run short. Congress is currently working on a funding extension to buy some time for further negotiation. There is still a multitude of hang-ups that both sides are trying to agree on. These include the size of direct payments, FEMA funds for states, and calls for restrictions on Fed emergency lending powers. On a positive note, Democrats and Republicans have agreed to set aside some more difficult items on this bill. State and local aid and liability protections will be addressed in later negotiations.  

Bridging the gap until full uptake of the vaccine remains of the utmost importance. Employment has meaningfully weakened along with retail sales over the last few weeks. A little more cushion can get us to the end. Then, the question will shift to the durability of the market advance. Of course, the answer to that questions will lie in the strength of earnings as the economy comes back online. It will be up to companies to prove that the record stimulus and productivity initiatives will substantially boost profits. We expect that Q2 earnings in 21 could be of particular importance.  

Preston May, CBE®
Research Analyst

This report was prepared by Donaldson Capital Management, LLC, a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser.

An index is a portfolio of specific securities, the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios, and investors cannot invest directly in an index. An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown.

S&P 500: Standard & Poor’s (S&P) 500 Index. The S&P 500 Index is an unmanaged, capitalization-weighted index designed to measure the performance of the broad U.S. economy through changes in the aggregate market value of 500 stocks representing all major industries.

 

This report was prepared by Donaldson Capital Management, LLC, a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Information in these materials are from sources Donaldson Capital Management, LLC deems reliable, however we do not attest to their accuracy.

An index is a portfolio of specific securities, the performance of which is often used as a benchmark in judging the relative performance to certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Past performance is not a guarantee of future results. The mention of specific securities and sectors illustrates the application of our investment approach only and is not to be considered a recommendation by Donaldson Capital Management, LLC.

S&P 500: Standard & Poor’s (S&P) 500 Index. The S&P 500 Index is an unmanaged, capitalization-weighted index designed to measure the performance of the broad U.S. economy through changes in the aggregate market value of 500 stocks representing all major industries.