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January Economic Review: Rising infections lead to renewed restrictions and slower growth – but we expect improvement soon

January 19, 2021

Economic Review: Mostly weak data as recovery slows to close out 2020 (Page 3)

The recovery’s slowdown intensified in December as payrolls shrank for the first time since April and consumer confidence and spending each took a hit. On the other hand, bright spots included faster growth in both the manufacturing and (surprisingly) service sectors. Recent and likely future stimulus packages should help spending in the months to come, but it will ultimately take sufficient vaccinations for the recovery to take off again.

Financial Markets Review: Risk on, again (Page 4)

Optimism for healthy earnings gains in 2021 pushed equity markets to record levels for December (and still more early in January). Importantly, investors rewarded smaller cyclical firms as confidence in the recovery rose. Low (albeit rising) Treasury yields, and tight corporate spreads further encouraged bargain hunting in recently out-of-favor groups, particularly among retail investors. January’s change in the political environment helped longer-term interest rates to bump higher, although the level of these rates remains historically low.

The Outlook: In like a lamb, out like a lion (Page 5)

The past year will, for obvious reasons, go down as one of the most unique (and painful) in U.S. economic history. While 2021 promises to be staid by comparison, the ongoing pandemic and the lingering uncertainties surrounding its endgame promise another (albeit much tamer) rollercoaster ride.

Go deeper with the full January report linked below.