Major Averages Hit More Record Highs

Quick Update

As a quick update to kick off today’s newsletter, I would like to summarize my correct calls and what I profited on since beginning to publish these updates. While nobody can predict the future, the major calls I am most proud of since producing these letters are 1) adding emerging market exposure and 2) hedging or selling the U.S. Dollar.

Emerging markets have been some of the best performers in 2020, and I have made some bullish calls on specific regional markets for 2021 as well. I have been touting emerging markets since my first report, but when I switched my focus to specific regions, my calls became even more correct. On December 3rd, I called Taiwan (EWT ETF) the best bet for emerging market exposure while avoiding the risks and baked in profits of China. Since then, the EWT ETF which tracks Taiwan has gained over 4.3% while the MCHI ETF which tracks China has fallen over 3.3%. The Taiwan ETF has also outperformed the SPY S&P 500 ETF and the IEUR ETF which tracks Europe.

My calls on the U.S. dollar were also correct. Since I started doing these newsletters about a month and a half ago, I consistently reiterated that the dollar should be hedged or avoided because of the Fed’s policies, effect of interest rates this low for this long, government stimulus, strengthening of emerging markets, and inflation. I also said that any minor rally the dollar would experience would be fool’s good. In the last month and a half, the dollar has fallen around 2.3%, and since it briefly pierced the 91-level on December 9th, it has fallen another 1%.

Markets kicked off the final week of 2020 with a surge towards record highs after President Trump finally signed off on the stimulus bill.

News Recap

  • All major indices closed at record highs. The Dow Jones rose 204.10 points higher, or 0.7%, to close at 30,403.97. The S&P 500 climbed 0.9% to 3,735.36, and the Nasdaq rose 0.7% to 12,899.42. Meanwhile, the small-cap Russell 2000 underperformed and declined 0.38%.
  • After President Trump called the $900 billion stimulus package an unsuitable “disgrace,” and alluded to possibly vetoing the bill, over the weekend the president signed the bill into law. By signing off, a government shutdown was averted while unemployment benefits were extended to millions of Americans.
  • After President Trump demanded stimulus checks for Americans to be raised from $600 to $2,000 each, the Democrat-led House voted for this measure on Monday (Dec. 28). The ball is now in the GOP-led Senate’s court on the measure. They are not expected to approve the measure.
  • Apple led the Dow higher, and gained 3.6%. Disney also climbed nearly 3%.
  • Communication services, consumer discretionary and tech were the best performing sectors in the S&P 500, with each rising over 1%.
  • Amidst fears of a COVID-19 “surge on top of a surge” after the Christmas holiday, over one million people in the U.S. have now been vaccinated. Meanwhile, the U.S. has averaged at least 184,000 new infections per day.
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