The first full month of the Biden administration begins with COVID-19 still at the center of any economic discussion, including vaccine production/distribution and fiscal aid. The surge in cases, hospitalizations, and deaths in late 2020 led to increased restrictions in the United States and abroad, leaving a negative imprint on multiple economic metrics in December.
The vaccine distribution effort has been muddled with hiccups at all levels of government, and the White House’s $1.9 trillion stimulus proposal has been met with opposition from even more moderate members of Congress. All of this adds up to a murkier near-term economic outlook, and the tone in financial markets as January progressed could be described as curbed enthusiasm (hat tip to Larry David).
- A new White House, but the issue remains the same dealing with the COVID-19 pandemic.
- There were positive trends on the virus front in January, including reduction in the number of people hospitalized for COVID in the United States.
- Fed Chair Powell said it was premature to even discuss eventual exit plans during the January 27 FOMC press conference, but fixed income markets, still scarred by the 2013 taper tantrum, remain fixated on the timing of the Fed’s unwind plans.
It wasn’t all doom and gloom in January, though. The trajectory of COVID cases and hospitalizations has improved from the November/December peak. Moreover, growth rates in hospitalizations have declined in all five regions of the country. Concern over hospital capacity, particularly ICU beds, has been one, if not the most, predominant driver of lockdowns across the country. Therefore, this positive trend over the last few weeks may perhaps brighten the outlook on multiple fronts, or at least offset some of the negatives mentioned above, assuming it continues. California lifted its regional stay-at-home orders on January 25, and New York also eased restrictions in parts of the state last week.
This market overview is provided by ALM First Financial Advisors, LLC, the investment advisor for Trust for Credit Unions. Read more from ALM First about the latest economic data releases and overall market trends at Trustcu.com.