A new administration settled in this week and we will likely see another stimulus bill in the coming weeks. The current proposal is $1.9T but that number is likely to shrink as politicians on both sides are having reservations surrounding the exploding deficit. For 2021, both sides will need to work on rebuilding the economy and that might happen literally if an infrastructure bill is introduced later this year.
If all goes well, the economy should get a significant lift in economic activity by summertime as the U.S. population becomes inoculated. Currently, inoculations are running at a seven day average of 913k but we need to double that number to get herd immunity by summertime according to experts. States will likely re-open their economies this Spring as the chart below shows that hospitalization rates are falling in a sign the post holiday bump in cases may be over.

The stock market has been taking all this in by grinding higher and rotating leadership under the hood. For example, the large cap technology companies have been sluggish for weeks but finally came alive this week to push the index up to new all-time highs. This may be the story of 2021 as market breadth has been good as sectors such as energy are participating as they emerge from multi-year downtrends. For the S&P, this is resulting in a channel which began last November and continues to contain this multi-week uptrend. A channel break and a move below 3750 would indicate a larger corrective move but the market is holding re-tests of the lower boundary of the trend channel indicating buying pressure at slightly lower levels.

Next week we will continue to see many earnings reports hit the tape and hopefully more insight regarding the next move by Congress.
Chart of the Week!

Economic & Central Banking Snippets
- About 900,000 U.S. workers filed for unemployment benefits last week as the labor market struggles to recover this winter. Jobless claims, a proxy for layoffs, remain above the pre-pandemic peak of 695,000 and are higher than in any previous recession for records tracing back to 1967. (WSJ)
- The January NAHB home builder sentiment index slipped to 83 from 86 and that was 3 pts below expectations. Keep in mind though the breakeven is 50 so this is still a very enthusiastic level of confidence. On the demand side, the lack of inventories remains a problem which then creates another and that being high prices. The NAHB said “Despite robust housing demand and low mortgage rates, buyers are facing a dearth of new homes on the market, which is exacerbating affordability problems.” (WSJ)
- Builders are responding to high demand and limited supplies the traditional way: Construction of single-family homes rose to the highest level in more than 14 years last month.

Macro Snippets
- The Johns Hopkins database reports 189K new COVID-19 cases which is down 20% from Thursday last week. The seven-day average has now fallen 24% from its peak on January 8th. Test positivity also is now below its pre-holiday level and is falling rapidly. (Pantheon Macroeconomics)

- $2.28 billion— The total in U.S. box office revenue in 2020, down sharply from $11.4 billion the year before. The pandemic has forced most U.S. movie theaters to close, upending Hollywood’s business model and leading movie studio executives to lean more into streaming for revenue growth, especially as they continue to sit on billions of dollars in unreleased content. (WSJ)
- President-elect Joe Biden’s new pick for a leading role in the U.S. Department of Health and Human Services (HHS) is a strong ally of the medical marijuana community. A positive for canabis stocks?
- Netflix ended last year with more than 200 million subscribers for the first time. The company got a boost from the coronavirus pandemic, which forced consumers to cut back on a host of leisure activities as economies locked down.

- Microsoft is investing in General Motors’s driverless-car startup Cruise as part of a strategic tie-up, another sign of renewed interest in the autonomous-technology space after a relatively quiet period. Microsoft is among a group of companies that will invest more than $2 billion in San Francisco-based Cruise, which has been majority owned by GM since early 2016. The financing brings Cruise’s valuation to $30 billion, Cruise said, up from an estimated $19 billion in spring 2019. (WSJ)

That is all for now and thank you for being a subscriber!
Regards,
Paul J. McCarthy, III
President – Kisco Capital