Report (Premium Edition) 12-21-2020

The holiday abbreviated week should be quiet amid the pandemic and more restrictive lockdowns. While economic growth has slowed, risks of a double-dip recession have declined measurably now that vaccines are realities. Wall Street is ending the year on better footing than was expected in the spring thanks to a massive fiscal and monetary stimulus that helped limit the damage from the shuttering of the globe. Treasury yields have also been on the rise although the FOMC is committed to maintaining an accommodative stance for years to come. 

We remain very bullish for US equities as a whole and as we head into the holidays for the above-mentioned reasons. The S&P 500 chart above continues to show a strong bull trend. There is still a substantial risk of a market dip is retail sales show bad numbers along with unemployment. The dip will most likely be less than 5% and bounce back on because of Congress’s willingness to take action.

There are plenty of data reports on this week’s condensed calendar though none will change the outlook as we look toward 2021. Thursday is a shortened session in the markets ahead of the Christmas holiday Friday. The government will also be closed on Thursday and Friday. The focus will be on Washington in hopes that a relief bill soon will be passed.

The data slate has just the November Chicago Fed national activity index. The Treasury will auction $24.0 bln of reopened 20-year bonds. For Fedspeak, Brainard is on deck. It will be a very crowded Tuesday and Wednesday, however, with the calendar condensed by the holidays. Also on tap this week are consumer confidence, home sales, durable orders, income, consumption, revised GDP, and jobless claims. 

Key Drivers for the Week of Dec 21

TIP – This is a 1 minute brief bullet-point summary as a tool that gives them a fast and simple list of what to watch for and talking points.

  • Vaccine rollouts provide optimism for 2021 after a tough 2020
  • Christmas holidays to shutter most of the globe into the weekend
  • Brexit going down to the wire; U.S. stimulus negotiations continue
  • U.S. data on consumer confidence, home sales, durable orders, jobless claims
  • Canada October and Q3 GDP reports awaited, along with building permits
  • Japan services PPI, Tokyo CPI, unemployment data slated
  • Thailand’s BoT expected to maintain an unchanged 0.50% policy rate
  • Eurozone and German consumer confidence likely hit by virus and lockdowns

Key Market Trends

Tip: Use this as a quick guide on the direction of key markets. I once had a client that would call me nearly every day asking the direction of the markets. This is a quick cheat sheet to know the trend and help understand what is happening with the markets.

  Last CHG % CHG HIGH LOW TREND
Dow 30179.06 −0.41% −124.32 30343.59 30029.44 Bull
S&P 500 3709.42 −0.35% −13.07 3726.7 3685.84 Bull
Crude (WTI) 46.95 -4.24% -2.08 49.293 46.231 Bear
Gold 1882.16 0.10% 1.96 1906.67 1854.89 Bull
10 Year 0.908 −3.69% −0.035 0.945 0.882 Bull
Bitcoin/USD 22739.03 -3.12% 731.82 24123.83 21864.86 Bull
US Dollar Index 90.459 0.49% 0.443 91.018 89.924 Bear
VIX 28.56 32.41% 6.99 31.46 24.23 Bull
REIT Index 2061.23 −2.08% −43.73 2106.22 2048.16 Bull

S&P 500 Sectors

Tip: Use this section to know the performance of various sectors, weight portfolios, or look for trades. Modern portfolio theory stresses the importance of diversification, but recently several sectors like technology have out-performed others like unities. This is also a way to narrow the sectors to find investment opportunities.

Sector Name 5-Day Return 1Month  6 Months YTD Return 1YR vs S&P 500 3YR Return Trend
 Basic Materials 1.80% 4.80% 31.20% 18.40% 1.30% 22.20% Bull
 Communication Services 0.00% 6.30% 25.30% 27.80% 10.30% 35.70% Bull
 Consumer Cyclical 3.50% 8.40% 39.10% 46.80% 29.70% 82.40% Bull
 Consumer Defensive 0.70% 2.00% 16.30% 10.40% -7.10% 28.50% Bull
 Energy -4.10% 12.00% 2.50% -31.50% -49.20% -37.40% Bear
 Financial Services 0.20% 4.80% 20.50% -5.40% -24.30% 7.00% Bear
 Healthcare 1.60% 5.50% 17.80% 17.90% 0.00% 50.20% Bull
 Industrials 0.40% 2.70% 29.70% 11.90% -6.40% 26.00% Bull
 Real Estate 0.60% 0.20% 6.40% -6.20% -22.50% 11.90% Bear
 Technology 3.50% 7.90% 28.10% 44.00% 28.00% 115.10% Bull
 Utilities 0.10% -2.60% 6.90% -2.50% -20.90% 23.50% Bear

Week Ahead: Reason to Cheer After a Tough Year

Holiday cheer has been picking up in equity markets, with sentiment supported by the vaccine rollouts, U.S. stimulus expectations, continued faith a Brexit deal can be reached, and fresh reminders that central banks are in the ultra-accommodative mode for as long as it takes. Those factors have allowed stock markets to look with hope to 2021 and past the ongoing surge in virus cases and ratcheting up of restrictions that could slow the recovery in each region and weigh on global growth in Q4 and Q1. The vaccines promise a return to more normal activities later next year, and the stock, bond, currency, and commodity markets have increasingly reflected the firming of sentiment on the medium-term outlook. Narrow trading ranges should hold as the markets look past heavy data slates over the holiday-shortened week. Stimulus talks will be monitored, while it’s the moment of truth for Brexit.

NORTH AMERICA

The schedule of U.S. data releases is thick in this holiday shorted week with the government shut Thursday and Friday and markets closing early on Thursday before the Christmas holiday on Friday. The busy data schedule will cover most sectors of the economy but is unlikely to change expectations that the natural slowing in growth from the robust 3Q rebound is under increasing pressure from the virus and lockdowns. GDP posted a record-breaking 33.1% pace last quarter and is looking to slow to about 6.5% this quarter. However, the various vaccines that are rolling out will lessen the risk of a recession in 2021 and should help boost optimism into the new year. Meanwhile, negotiations over stimulus drag on with the Senate holding an unusual weekend session to try to get a bill signed before the government closes on Thursday.

High-frequency data, and especially initial jobless claims, were the first to ring alarm bells over the slippage in the labor market and the economy as a consequence of the second wave of virus and the lack of additional relief measures. They have been on the upswing in the past two reporting weeks with the 885k print the highest since the September 4 week. And with renewed tightening in lockdowns and mitigation measures, they threaten to remain elevated. We’re forecasting another 5k rise to 890k in the week of December 19 (Wednesday).

Consumer confidence has been surprisingly robust during the recovery, and even with the virus and various crosscurrents, it appears to have remained so in December. The Pfizer BioNTech approval in November should help support into December. Consumer confidence (Tuesday) is expected to rise 1.9 ticks to 98.0 in December, recovering some of the 5.3 decline to 96.1 in November. The final Michigan sentiment report (Wednesday) should be unchanged at the 81.4 print from the preliminary release, up 4.5 points from the 76.9 in November. The housing sector remains a standout in the pandemic economy amid low mortgage rates and a shift in household preferences for living in the suburbs, though we see some modest slippage after robust sales since the summer. November existing-home sales (Tuesday) are pegged dipping -0.7% in November to 6.800 mln from the 14-year high of 6.850 mln in October. November new home sales (Wednesday) should slide -0.4% in November, pulling back to a 995k pace from 999k in October after surging to a 14-year high of 1,002k in October.

Durable goods orders (Wednesday) are forecast to rise 1.4% in November, underpinned by a 2.9% climb in transportation orders amid a lift from Boeing (where plane orders rose to 27 on the month) and vehicle assemblies. Income and consumption data will not be so rosy. We expect a -0.2% decline for personal income (Wednesday) in November after the -0.7% fall in October, alongside a -0.2% dip in consumption after the 0.5% October gain. Finally, we expect a slight boost in Q3 GDP (Tuesday) growth to 33.2% in the third report from 33.1% in the second release, shedding little new light on the already well-documented Q2/Q3 swing in the economy.

In Canada, the October GDP report (Wednesday) is expected to reveal a 0.4% gain (m/m, sa) after the 0.8% rise in September. The separate quarterly GDP measure rebounded 40.5% in Q3 after plunging -38.1% in Q2. The spike in virus cases and consequent restrictions drive our estimates for sub 3% growth in Q4 and Q1 — we see a 2.3% clip in Q4 and a 2.9% growth rate in Q1. However, the vaccine should lift growth in the remainder of 2021, with a solid 9% rate seen in Q2. November building permits, due Thursday, are expected to rebound 5.0% after the -14.6% drop in October. The markets are closed on Friday for the Christmas holiday.

ASIA

The regional calendar is light this week, though it will reveal Japan employment and Tokyo CPI figures. China’s docket is empty. Elsewhere there is the usual complement of inflation, trade, and production data. It will be an abbreviated week too with many countries closed for Christmas on Friday, including Hong Kong, Korea, India, Indonesia, Malaysia, Philippines, and Singapore (with Indonesia and Philippines shut Thursday too). For central banks, Thailand’s BoT meets (Wednesday) with no change to its 0.50% o/n repo rate expected.

Japan’s docket gets under way Thursday with November services PPI, seen at an unchanged -0.6% y/y. Deflation should be seen in December Tokyo CPI (Friday) as well. The headline indicator is forecast at -0.7% y/y from -0.8% overall, though sliding to -0.9% y/y from -0.7% on a core basis. November unemployment (Friday) likely remained steady at 3.1%, while the job offers to seekers ration is predicted at an unchanged 1.04.

Taiwan November export orders (Monday) are penciled in at a 10.0% y/y pace from 9.1% as regional growth continues to improve. November unemployment (Tuesday) should dip to 3.7% from 3.8%. November industrial output (Wednesday) is forecast to have risen at a 10.0% y/y rate from 7.1%. South Korea November PPI is due Tuesday, while in Hong Kong, November CPI (Monday) is expected to warm slightly to -0.1% y/y from -0.2%. In Thailand, the BoT meets (Wednesday) with no change to its 0.50% o/n repo rate expected. It’s been steady at this level since the 25 bp easing in May. The year began with the rate at 1.0%. November exports (Wednesday) should post a -4.0% y/y rate of decline, a little slower than the from -6.7% previously. Singapore November CPI (Wednesday) is seen at -0.1% y/y from -0.2%, while November manufacturing production (Thursday) is penciled in bouncing to a 10.0% y/y clip from -0.9%. Malaysia November CPI (Wednesday) is estimated at -1.4% y/y from -1.5%.

Australia’s calendar is lean this week, with just preliminary November retail sales (Tuesday). Sales rose 1.4% in October after a -1.1% drop in September and a -4.0% loss in August. The final November retail sales report will be released on January 11, 2021. There is nothing from the RBA this week. Governor Lowe said early this month that the RBA doesn’t expect to lift the cash rate for at least three years. New Zealand’s docket is also thin, with only November card spending (Monday) out this week. The RBNZ does not meet again until February 24 of 2021. In November, the RBNZ topped up stimulus with a new Funding for Lending Program to start in December, aimed at reducing banks’ funding costs and lowering interest rates. The cash rate was left unchanged at a record low 0.25% and the Large Scale Asset Purchase program remained at NZD 100 bln.

EUROPE

Eurozone: It will be a holiday-shortened week with Christmas on Friday. For the German stock, it is only a three day week with the DAX closed Thursday and Friday. With governments trying to get a grip on virus developments Christmas holidays have been extended at schools and many companies and data release ahead of the Christmas break are thin on the ground. Brexit talks, however, continue and the EU parliament is on standby to get in and vote through a potential deal, although the way things are going, there is the risk that both sides stick to their guns right until the end – i.e. on December 31, which may leave parliaments to wave through any agreement early next year, without any real chance to scrutinize the agreement.

There are few data releases with consumer confidence numbers for the Eurozone and Germany the most interesting of the bunch. The German GfK reading (Tuesday) is likely to be hit by the tighter restrictions that came into effect on December 16 and the rise in case as well as death counts, and we are looking for a drop to -8.0 in the advance reading for January from -6.7 in December. The preliminary Eurozone consumer confidence reading (Tuesday), is expected to slip to -18.3 from -17.6. German import prices (Wednesday) and French PPI (Wednesday) are unlikely to rock the boat and final Spanish GDP numbers for Q3 (Wednesday) are too backward looking to have any impact.

Events include the ECB’s latest economic bulletin, to be released on Thursday, but should follow the script from the last meeting when the central bank extended and strengthened PEPP and TLTRO programs to get the economy through the pandemic and facilitate the recovery next year.

U.K.: the focus remains squarely on the Brexit endgame. EU chief negotiator Barnier said on Friday that both sides are at the “moment of truth,” and that there is only a “very narrow” path to a trade deal, adding that “..I cannot say what will come during this last home straight of negotiations.” The European Parliament demanded that a text of an EU-UK agreement must be made available by Sunday (December 20th) for there to be sufficient time for them to scrutinize it before a ratification vote ahead of the December-31 deadline. However, Belgian MEP Verhofstadt said earlier that this may not be “realistic” and that talks have to continue into the Christmas week. Officials from both the EU and UK have been saying that an agreement cannot come at any price. Barnier said that “we have to be prepared for all eventualities”, while UK PM Johnson reported warned EU’s von der Leyen during a telephone conversation late yesterday that negotiations would collapse unless the EU moves “substantially.”

Overall, the tone, as of Friday, was relatively more downbeat that earlier last week, when there were reports that both sides had offered concessions, and in particular that the EU was accepting a ‘managed divergence’ plan instead of ‘dynamic alignment’, along with a more acceptable form of governance (from the UK’s perspective), which had lifted market expectations that a deal was finally near. Fishing rights remain a sticking point, while the state aid issue has also resurfaced as a difficultly, though it’s difficult to know exactly where negotiations are, and it might be that the UK government is tactically maintaining the maximum threat to leave without a deal, sensing that Brussels is genuinely worried about what the untethered UK might do in terms of deregulation and tax cuts. Some pundits are mooting that talks might continue right up to December 31, which is the legal deadline. The UK will leave the common market and customs union at midnight on that date. The ratification process in this scenario would happen in January in some kind of postponement fudge. We continue to anticipate that a deal will materialize.

The UK data calendar is quiet until the new year.

Switzerland: The Swiss data calendar is also thin.

Stocks & ETF Watch List

Tip: Use this section to find stocks and ETFs to add value to your portfolio by increasing the alpha (return) and decreasing beta (beta). Our list is updated weekly to help provide our readers with timely insights.

Solid Picks

This group of stock/ETF picks is likely to experience growth and perform well into the near future. The rank score of a stock, where a score of 1 is best. This algorithm compares a company to its peers and considers the consistency of key return metrics. The overall score, which 99 is the best) is computed from the percentile rank of valuation, growth, financial strength, efficiency, momentum, and dividends. The score also considers the past performance of a stock in each of the component areas relative to peers.

Ticker Rank Company Dividend  Beta 1 YR 1YR vs S&P 500 3YR vs S&P 500 3R vs Sector Overall Score
HEAR 1 Turtle Beach –  0.75 165.10% 1206.80% 1137.60% – 
BIO 2 Bio-Rad Laboratories –  0.72 49.50% 97.20% 92.90% – 
BTG 3 B2Gold 2.90% 0.52 35.80% 55.30% 79.10% 75
KGC 4 Kinross Gold 1.60% 0.46 60.20% 41.20% 64.90% 56
PGR 5 Progressive 5.10% 0.73 17.60% 42.10% 81.00% 87
GOLD 6 Barrick Gold 1.60% 0.4 12.50% 22.60% 46.40% 60
MED 7 Medifast 2.30% 0.9 101.40% 151.00% 114.50% 94
TGT 8 Target 1.60% 0.67 16.70% 143.40% 160.80% 39
FLWS 9 1-800-Flowers.com –  0.88 68.90% 87.10% 50.60% – 
CHE 10 Chemed 0.30% 0.84 5.60% 81.70% 77.40% 38
CORT 11 Corcept Therapeutics –  0.73 88.90% 12.80% 8.50% – 
NEM 12 Newmont 2.60% 0.43 31.30% 31.80% 55.60% 91
DG 13 Dollar General 0.70% 0.5 17.60% 88.20% 105.60% 5
BAH 14 Booz Allen Hamilton 1.40% 0.68 11.80% 95.00% 114.80% 48
LLY 15 Eli Lilly 2.00% 0.74 16.00% 67.00% 62.70% 34
TMO 16 Thermo Fisher Scientific 0.20% 0.73 27.40% 97.20% 92.80% 21
STE 17 Steris 0.90% 0.87 6.00% 68.30% 64.00% 52
HLI 18 Houlihan Lokey 1.90% 0.52 25.40% 14.20% 53.10% 83
MTD 19 Mettler-Toledo Intl –  0.87 27.30% 30.60% 26.30% – 
PKI 20 PerkinElmer 0.20% 0.72 32.20% 51.00% 46.70% 64
ADUS 21 Addus HomeCare –  0.76 6.00% 199.90% 195.60% – 
CTXS 22 Citrix Systems 1.10% 0.55 1.50% 9.60% -59.70% 50
AKAM 23 Akamai Technologies –  0.61 7.10% 17.20% -52.00% – 
WSO 24 Watsco 3.10% 0.52 14.10% 6.40% 26.30% 32
COST 25 Costco Wholesale 0.80% 0.6 11.10% 55.70% 73.00% 11
DHR 26 Danaher 0.30% 0.75 32.40% 97.60% 93.30% 79
WPM 27 Wheaton Precious Metals 1.10% 0.38 33.10% 55.90% 79.60% 15
BR 28 Broadridge Financial Soln 1.50% 0.8 7.70% 32.10% -37.10% 90
WDFC 29 WD-40 1.00% 0.56 21.10% 90.20% 113.90% 10

Income Stock & ETFs Picks

This list of stocks and ETFs are selected for their ability to pay dividends. The dividend score of a stock, where a score of 99 is best. This algorithm compares a company to its peers and considers the consistency of key dividend metrics as well as their direction of change. The overall score, which 99 is the best) is computed from the percentile rank of valuation, growth, financial strength, efficiency, momentum, and dividends. The score also considers the past performance of a stock in each of the component areas relative to peers.

Ticker Company Dividend Beta 1YR 1YR  vs S&P 3YR vs S&P 3YR vs Sector Dividends Score Overall Score
BIP Brookfield Infr Partners 3.90% 1.24 -2.00% 0.90% 23.20% 22 10
BKH Black Hills 3.70% 1.17 -39.00% -34.20% -11.90% 49 79
BUD Anheuser-Busch InBev 2.00% 0.89 -29.30% -77.10% -59.70% 11 3
CBSH Commerce Bancshares 1.70% 1.03 -19.90% -11.00% 27.90% 55 40
CINF Cincinnati Financial 2.90% 1.24 -36.30% -24.00% 14.90% 93 83
DD DuPont de Nemours 1.70% 1.17 -4.90% -68.30% -44.60% 16 22
DOV Dover 1.60% 1.16 -8.00% 20.50% 40.40% 54 46
EMR Emerson Electric 2.50% 1.19 -9.40% -16.70% 3.20% 72 64
FRT Federal Realty Investment 4.80% 1.2 -47.10% -72.40% -38.40% 75 29
GPC Genuine Parts 3.20% 1.13 -23.80% -31.20% -67.70% 65 23
HD Home Depot 2.20% 1.09 8.00% 11.50% -25.00% 52 68
HRL Hormel Foods 2.00% 0.45 -8.90% -8.50% 8.80% 57 53
JNJ Johnson & Johnson 2.60% 0.68 -8.20% -27.70% -32.00% 46 67
KO Coca-Cola 3.10% 0.81 -15.90% -16.70% 0.60% 64 28
LOW Lowe’s Companies 1.50% 1.18 20.20% 51.40% 14.90% 56 88
MMM 3M 3.30% 0.82 -10.70% -64.40% -44.60% 94 81
MO Altria Group 7.90% 0.74 -26.20% -72.60% -55.30% 81 77
NFG National Fuel Gas 4.20% 0.76 -24.40% -60.90% 22.40% 67 47
PG Procter & Gamble 2.30% 0.71 -4.10% 19.20% 36.50% 66 87
PH Parker Hannifin 1.30% 1.44 15.10% -0.90% 19.00% 50 82
SWK Stanley Black & Decker 1.50% 1.46 -7.00% -31.30% -11.50% 83 86

Dogs of the Dow

This list of DOW stocks based on H. G. Schneider’s Article in the Journal of Finance in 1951 that used price-earnings ratio. The general idea is that blue-chip companies that pay a dividend are more likely to withstand an economic downturn. The dividend score of a stock, where a score of 99 is best. This algorithm compares a company to its peers and considers the consistency of key dividend metrics as well as their direction of change. The overall score, which 99 is the best) is computed from the percentile rank of valuation, growth, financial strength, efficiency, momentum, and dividends. The score also considers the past performance of a stock in each of the component areas relative to peers.

Ticker Company Dividend Beta 1YR 1YR  vs S&P 3YR vs S&P 3YR vs Sector Dividends Score Overall Score
CAT Caterpillar 2.30% 0.99 9.00% -14.00% 5.10% 77 53
CVX Chevron 5.60% 1.36 -36.10% -58.30% 23.10% 49 40
DOW Dow 5.10% 1.33 -12.40% –  –  60 7
IBM IBM 5.20% 0.99 -21.30% -52.90% -119.40% 95 68
KO Coca-Cola 3.10% 0.81 -16.00% -17.40% 0.10% 64 27
MMM 3M 3.40% 0.82 -10.90% -66.00% -46.90% 93 79
PFE Pfizer 3.80% 0.69 -0.90% -13.00% -15.50% 82 65
VZ Verizon Communications 4.10% 0.52 -15.00% -15.70% -5.50% 87 68
WBA Walgreens Boots Alliance 4.50% 0.82 -44.00% -82.20% -84.70% 74 67
XOM Exxon Mobil 7.90% 1.1 -50.90% -84.10% -2.70% 73 61

Economic Data Calendar

We have plenty of releases in the week of the Christmas holiday. We expect a slight upward revision in the Q3 GDP growth clip to 33.3% from 33.1%. We expect a modest November declines for both personal income and personal consumption, while durable goods orders rise significantly in November with gains both with and without transportation. We expect both new and existing home sales to post modest November pull-backs from lofty 14-year highs in October, though with upside risk in both November and December from seasonal factors that may overstate holiday disruptions with the pandemic. We expect a modest December rise in consumer confidence, following a drop in November.

Week of December 21

The second consecutive rise in Initial claims in the BLS survey week of December heightened fear of outsized coronavirus disruptions in the data to be released over the coming weeks. Yet, the data may instead highlight another theme for upcoming reports, and that is the impact of atypical holiday behavior on seasonally adjusted data due to the big swings in the seasonal factors for many series over the holidays that may prove ill-suited to pandemic conditions.

For claims, we switched to additive from multiplicative seasonal factors in September, and the usual huge seasonal rise in NSA claims through the holidays may be lifting the reported SA data with the new factors given the unusually high level of claims overall. This may partly explain the gap between deteriorating initial claims and tightening continuing claims, alongside rising ineligibility that is pushing some people out of the benefits pool.

The housing market typically reveals a massive seasonal downswing through the winter, and this downswing may be smaller this year given that there are few holiday activities to disrupt transactions. Of course, weather will still impact construction. But, sales likely showed less downswing than usual during the week of Thanksgiving, given an SA surge in the MBA purchase index alongside a smaller than typical NSA drop, and this pattern may be repeated through Christmas and New Year’s. Because transaction totals are typically small in these periods, the seasonal factors are huge, leaving room for possible big SA spikes in some measures in both November and December. This impact will be exacerbated by households seeking to switch school districts, and warm weather through November and early-December. Indeed, the holiday breaks this year may provide time for idle households to make changes.

Alternatively, seasonal factors will depress other measures, as the usual surge in travel and hotel stays, alongside the surge in traffic at restaurants and bars, will face an undershoot this year, prompting the potential for out-sized reported drops for any SA measures sensitive to these sectors relative to actual underlying NSA declines.

Monday 12/23:

Japanese Convenience Same Store Sales for November
Japanese Nationwide Department Store Sales
Japanese Tokyo Department Store Sales
Tesla Joins the S&P 500 Index
U.K. CBI Distributive Trades Survey Expected for January (6 a.m.)
U.K. CBI Distributive Trades Survey Realized for December (6 a.m.)
Chicago Fed National Activity Index for November (8:30 a.m.)
Eurozone Preliminary Consumer Confidence Indicator for December (10 a.m.)

Tuesday 12/22:

Japanese Chain Store Sales for November
German GFK Consumer Confidence for January (2 a.m.)
U.K. Final Exports, Imports for Q3 (2 a.m.)
U.K. Final Gross Fixed Capital Formation for Q3 (2 a.m.)
U.K. Final Government, Household Expenditure for Q3 (2 a.m..)
U.K. Final Business Investment for Q3 (4:30 a.m.)
U.K. Final GDP for Q3 (4:30 a.m.)
U.K. Public Sector Net Borrowing, Cash Requirement for November (4:30 a.m.)
Final After Tax Corporate Profit for Q3 (8:30 a.m.)
Final GDP for Q3 (8:30 a.m.)
Consumer Confidence for December (10 a.m.)

Existing Home Sales for November (10 a.m.)
Richmond Fed Index for December (10 a.m.)
American Petroleum Institute Crude Oil Inventory Data (4:30 p.m.)

12/22 Preliminary Q3 GDP: 33.3%

We expect a slight boost in Q3 GDP growth to 33.2% from 33.1%, with revisions of $3 bln for inventories, $4 bln for consumption, $1 bln each for intellectual property investment, residential investment, and public construction, -$1 bln for net exports, and -$2 bln for nonresidential construction. We expect Q4 GDP growth of 6.0%. The revised Q3 GDP figures should still show a quarter with dramatic rebounds for residential investment and equipment spending to notably robust levels, and out-sized Q2-Q3 gyration in both exports and imports that left big Q3 gains, and hefty recoveries in consumer spending. Government spending received an initial lift in Q2 from spending with the CARES Act, though most of this spending was transfer payments that don’t enter government purchases, and we saw a Q3 pull-back in government spending that should extend through Q4 and into 2021.

12/22 Existing Home Sales: 6.800 mln

We expect existing home sales to fall by -0.7% in November to 6.800 mln from a 14-year high of 6.850 mln in October. Pending home sales fell -1.1% in October, as this measure continues to unwind the all-time high in August. The MBA purchase index rose 2.7% in November, with a new 12-year high on a weekly basis at the end of the month. The two measures are consistent with a still-elevated sales pace through November, and existing home sales are tracked at closings, which leaves a lag for this series of one or two months. The median sales price is expected to edge higher to $314,000 in November from a $313,000 all-time high in October, leaving a climb in the y/y metric to 15.7% from 15.5%. In Q3, we saw an average sales pace of 6.137 mln, after a depressed 4.313 mln in Q2, and we expect an even stronger 6.817 mln pace in Q4. All the November and December housing data face upside risk from seasonal factors that may overstate holiday disruptions with the pandemic, given limits on typical seasonal behaviors.

12/22 Consumer Confidence: 98.0

Consumer confidence is expected to rise to 98.0 from 96.1 in November, versus a 6-year low of 85.7 in April. This compares to an 18-year high of 137.9 in October of 2018 and a recession-low of 25.3 in February of 2009. We expect the present situation index to improve to 106.6 from 105.9 in September and a 7-year low of 68.4 in May, versus a 19-year high of 176.0 in August of 2019 and a recession-low of 20.2 in December of 2009. The expectations index should rise to 92.2 in October from 89.5, versus an 18-year high of 115.1 in October of 2018 and a recession-low of 27.3 in February of 2009. We expect the 1-year inflation measure to moderate to 5.5% from 5.7% in November. All of the available confidence measures were oscillating near historic highs before being crushed by COVID-19, and throughout the Q2 drop-backs and ensuing bounce, it’s remarkable how firm the consumer measures have stayed relative to prior recessions.

Thursday 12/23

BoJ Minutes of October Meeting
Japanese Final Leading, Coincident Index for October (12 a.m.)
German Import for November (2 a.m.)
French PPI for November (2:45 a.m.)
MBA Mortgage Applications (7 a.m.)
Final Building Permits for November (8 a.m.)
Core PCE Deflator for November (8:30 a.m.)
Personal Income for November (8:30 a.m.)
FHFA Home Price Index for October (9 a.m.)
Final University of Michigan Sentiment for December (10 a.m.)
New Home Sales for November (10 a.m.)
Energy Information Administration Crude Oil Inventory Data (10:30 a.m.)

12/23 Personal Income/Consumption: -0.2%/-0.2%

We expect a -0.2% headline decline for personal income in November after a -0.7% drop in October, alongside a -0.2% drop in consumption after a 0.5% October gain. The projected November income decline reflects a 0.6% rise in compensation, but an ongoing unwind of jobless benefits and weakness in rental and proprietor’s income, as the April income boost from the CARES Act continues to unwind. We expect a savings rate pull-back to 13.4% from 13.6% in October, as we unwind the 33.7% peak in April. The expected 0.6% November rise for wage income and compensation reflects a 0.3% November rise for hours-worked and a 0.3% gain for hourly earnings. We expect a 4.1% growth pace for real consumption in Q4, after a 40.6% surge in Q3. We peg disposable income growth at -6.1% in Q4, after a -12.9% Q3 rate but an enormous 46.2% growth clip in Q2.

12/23 New Home Sales: 995k

We expect a -0.4% December pull-back for new home sales to a 995k pace from a 14-year high of 999k in October. We expect an increase in the median sales prices to $335,000 from $330,600 in October, leaving a y/y increase of 2.1%. We expect a 996k Q4 pace for new home sales, after a 994k pace in Q3. With the economy’s reopening, the recovery for new home construction and sales is proving much faster than for the rest of the economy, partly due to solid fundamentals going into the crisis, and even lower mortgage rates now. We’re also seeing migrations since Q2 that are boosting suburban demand and new home construction, given remote learning that is de-linking the housing cycle from the school year, extended work-from-home arrangements, and deteriorating conditions in urban areas. We may also see atypical strength for housing through the turn of the year, as the 2020 holiday’s may be less disruptive than the seasonal factors anticipate due to limits on typical seasonal behaviors. New construction has notably lagged sales, but we expect a steady climb in starts, construction, and completions given likely ongoing strength in new home sales.

12/23 Michigan Sentiment, Final: 81.4

We expect the final Michigan sentiment report to reveal the same 4.5 point December rise seen in the preliminary report to 81.4 from 76.9 in November and a 7-month high of 81.8 in October, as the index wanders back toward the 89.1 March reading. We saw an 8-year low of 71.8 in April and a 14-year high of 101.4 in March of 2018. We saw a current conditions rise to a 9-month high of 91.8 in December from 87.0, versus a 6-month high of 87.8 in September. We saw an expectations increase to 74.7 from 70.5, versus a 7-month high of 79.2 in October. The 1-year inflation measure plunged to an 8-month low of 2.3% from 2.8%, versus a 3.2% high in May that was last seen in August of 2014. The 5-10 year inflation measure sustained the November rise to 2.5% from a 7-month low of 2.4% in October and a 2.7% high in August and September that was also seen in May, and previously in March of 2016. We’ve seen erratic oscillations in the various confidence metrics since June around expansionary levels, despite huge fluctuations with the pandemic, on-and-off stimulus, vaccines, and the elections. The indexes remain well above readings from prior recessions, and with divergent swings for the surveys in recent months.

Thursday 12/24

BoJ’s Governor Kuroda Speaks
Japanese Corporate Services Price Index for November
Japanese Tokyo CPI for December
Japanese Job-Seekers Ratio for November
Japanese Unemployment Rate for November
Japanese Trade Balance for December
Japanese Final Export, Import for November
Japanese Final Trade Balance for November
Japanese Construction Orders, Housing Starts for November
Federal Government Offices Closed In Observance of Christmas Eve
Preliminary Core Capital Goods Orders Growth for November (8:30 a.m.)
Preliminary Durable Orders, Shipments for November (8:30 a.m.)

Initial Jobless, Continuing Claims (8:30 a.m.)
Equity Markets Close In Observance of Christmas Eve (1 p.m.)
Credit Markets Close In Observance of Christmas Eve (2 p.m.)
Fed Releases SMCCF (ETF Buying) Data (4:30 p.m.)

12/24 Durable Goods Orders: 1.4%

Durable goods orders are expected to rise 1.4% in November with a 2.9% climb in transportation orders, after a 1.3% headline orders rise in October that included a 1.4% transportation orders gain. The durable orders rise ex-transportation is pegged at 0.7%, after a 1.3% September rise. A defense orders gain is pegged at 4.2%, following a 24.0% October bounce. Boeing orders rose to 27 planes in November after two months at zero. The vehicle assembly rate is seen ticking up to 11.3 mln in November from 10.3 mln in October, versus a 0.1 mln trough in April. Durable shipments should be 1.5%, and inventories should be 0.3%. The I/S ratio is expected to fall to 1.68 from 1.70 in October, versus an all-time high of 2.24 in April for a series extending back to 1992. We saw a 1.88 I/S peak with the last recession in April and May of 2009.

12/24 Initial Jobless Claims: 840k

Initial jobless claims for the week of December 19 should remain elevated, and we assume a 5k rise in the weekly pace to 890k, after a 23k rise to 885k from 862k. Seasonal adjustment for initial claims was switched to being additive from multiplicative in September, and the usual seasonal rise in NSA claims through the holidays may be lifting the reported SA data with the new seasonal factors given the unusually high level of claims. We are likely also seeing a lift from expanding coronavirus restrictions. Claims are expected to average 882k in December, following averages of 748k in November, 786k in October, and 855k in September. The 885k December BLS survey week reading overshot recent BLS survey week readings of 748k in November, 797k in October, and 866k in September. We assume a 100k December payroll rise, after gains of 245k in November, 610k in October, and 711k in September.

Continuing claims fell by 773k to 5,508k in the week of December 5, following a minor upward revision in the prior week’s reading that left a 5,781k figure. We expect continuing claims to fall 108k the 5,400k area for the week ending on December 12. Though rising coronavirus restrictions are likely prompting some stalling in continuing claims downtrend, we expect resumed declines into early-2021. We expect continuing claims to fall by -689k between the November and December BLS survey weeks. We saw much larger prior declines of -1,734k in November, a hefty -4,924k in October BLS, -1,745k in September, -2,459k in August, -2,280k in July, and -1,610k in June.

Friday 12/25:

Christmas Holiday (U.S. Markets Closed)
Baker Hughes Rig Count Data (1 p.m.)
CFTC Commitment of Traders Report (3:30 p.m.)

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