2021 policy is coming into focus. Democrats are poised to take control of the US Senate, which would give them a majority in both houses of Congress. This will shift the policy outlook moderately to the left, but majorities are still razor-thin. Meanwhile, US Treasury yields are trending higher, but jobs numbers are down.
Focusing on the Future
The surprise wins in the Georgia Senate runoffs gave the Democrats control of both chambers of Congress, which could increase the odds of higher taxes (in 2022) and more regulation, but also more stimulus in the near term. Also, stocks historically have performed quite well under a “blue wave.”
Yields are moving higher
US Treasury yields increased after the Georgia elections, and the 10-year Treasury yield is finally back above 1% for the first time since the spring of 2020. With the possibility for more stimulus, along with an improving economy and higher commodity prices, yields likely will continue to trend higher. Value-style and financials equities may benefit from this move.
Jobs are weak again
140,000 jobs were lost in December, well beneath what was expected and the first negative month since April 2020. Only 56% of the jobs that were lost in March and April have come back, and it will take a long time for all of the jobs to return, unfortunately. Additionally, more weakness could be expected before the warmer months and COVID-19 vaccines are widely available. Manufacturing and services both remained strong in December, however, helping to offset the weak employment picture.
IMPORTANT DISCLOSURES
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth in the podcast may not develop as predicted and are subject to change.
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All index data is from FactSet.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. This Research material was prepared by LPL Financial, LLC.