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Updates from the EWM Team:
Financial updates, tips, and news you can use.

EWM Updates

Market News Thumbnail

Market News

It’s time to talk about unemployment again. The US Bureau of Labor and Statistics put out the January 2021 unemployment rate last Friday. It came in at 6.3% or about 0.2% better than forecasted and a 0.4% improvement over the end of 2020. This is a huge improvement over the depths of the pandemic when the official rate spiked above 15%.

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Market News

The S&P 500 had its best week of the new year, as corporate earnings season began in earnest last Tuesday. Netflix garnered most of the headlines by beating Wall Street expectations on subscriber and revenue growth during the fourth quarter (Q4) of 2020 as it continued to benefit from coronavirus lockdowns. The media streaming service reported that now with more than 200 million subscribers worldwide paying on average $11 dollars a month, the company will be able to generate enough cash to cover its production costs. Positive earnings surprises weren't just limited to the biggest technology companies either, as the financial sector handily beat expectations last quarter. Volatile capital markets and a record number of new companies going public last quarter helped boost the financials of the biggest companies in finance, including JPMorgan Chase, Goldman Sachs, Citigroup, and Morgan Stanley.

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Market News

We saw a bit of a shock last week when retail numbers from December came out shy of market consensus by almost 1% at -1.95% month over month. While the downward trend may be not what we like to see, when we look at it from a perspective of the previous economic cycle we are still making good progress. From the cycle high in the Great Recession (from 2007 to 2009), it took 41 months for retail sales to go from peak to peak (see the chart below). We would not be surprised by another difficult retail showing for January as the lockdowns are still in force throughout much of the country. However, this trend will most likely abate and steady itself as the vaccine rolls out and the weather warms. We will also see if any new stimulus will be forthcoming as Congress reconvenes this week.

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Market News

Pardon the excursion into hyperbole, but 2020 was an unusual year. Several seemingly solid ideas about investing faltered over the course of the year. Let's briefly look at one example. Companies with similar business activities are grouped into industrial sectors by the financial markets. Under different types of economic conditions, certain sectors traditionally perform well, while others struggle. Two sectors consistently used to illustrate this dissimilar performance are the consumer staples sector and the consumer discretionary sector. Companies in the consumer staples sector either produce or sell products that people buy on a regular basis, including food and personal care items.

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Market News

Bear with us, we are going to get technical and tell you why the stock market is undervalued and overvalued all at the same time, and why such things are really just constructs that we use to explain movements to ourselves.

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Market News

The market's rotation to small-cap stocks continued last week as companies with a market capitalization between $300 million and $2 billion were the only domestic equity sector to post a gain over the five days. In fact, since the end of September, smaller companies have significantly outperformed the more celebrated large-cap companies.in the S&P 500, as can be seen in the chart below.

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Bird As A Word Was Once Unheard

Bird as a word was once unheard. Old timers named flying animals brids. And a horse is a horse of course of course, but once its source was from old Norse, a word they called hrose. In fact, dirt was once drit, third was once thrid, and a curd was called a crud.

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Market News

The quote above from Warren Buffet tries to explain the thought patterns that often lead many investors astray. We have discussed previously how systematic errors in thinking, called cognitive biases, can lead to poor financial results; and, it is with this topic in mind, that we briefly discuss the life and work of magician James Randi, who passed away a little over a month ago at the age of 92.

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Tiny Little Leprechaun

If someone told you a tiny little leprechaun carried this newsletter through the interwebs to your computer, you would probably say that doesn't sound likely. "But why?" that same someone may reply. "Ockham's razor" is the answer you would give if you went to college and took a course on how to respond to silly questions. But what is Ockham's razor? Well, that is what this section is for.

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Market News

We have taken time to discuss the US Treasury yield curve in the past, but we wanted to take a moment to point out some of the issues currently infecting the broader fixed income market. Due to the pandemic and the intense market constriction earlier this year, the Federal Reserve needed to take action to make sure that there was liquidity in the market. They did an admirable job with that, injecting enough cash into the system to keep the gears of finance moving when everybody else was too scared to take a risk. What they have also done is to destroy (in the short term) the risk/reward interplay in the fixed income markets.

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Market News

The pandemic unleashed some unforeseen consequences, both negative and positive on the average household in the US. While there is still much to be done to fully recover, we have seen some things that could point to good outcomes when full mobility has been restored.

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A Pumpkin's Dignity

Who will speak on behalf of the pumpkin during this Thanksgiving? Is it not enough that his dignity is squashed every Halloween as he is gutted and carved into buffoonish jack-o'-lanterns? Or that at the start of every autumn, hordes of these noble gourds become grist for the corporate pumpkin spice mills that churn out the ubiquitous orange dust used to fill our lattes and infuse our candles? "The spice must flow," they insist. And now, pumpkin pie is to be the default dessert for our holiday meals. We are asking for too much sacrifice from the pumpkin. In these desperate times, why not try a desperation pie instead?

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Quirky Collective Nouns

A murmuration of starlings, a parliament of owls, a mischief of magpies, and a murder of crows. One reason English has more words than other language is its considerable collection of quirky collective nouns. The origin of this phenomenon is said to be The Book of Saint Albans, a hunting manual for the medieval gentleman of leisure that provided a list of "terms of venery" - collective nouns used to identify groups of specific animals that also conveyed a hint about those animals' essential characteristics. These words were meant to help hunters better understand the behavior of their quarry. (Note to self: stay away from crows).

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Market News

It is time to check back in on our old friend the yield curve. We know that the Federal Reserve is looking to keep the short end of the curve very low, but we are seeing an upward movement on the middle part of the curve (see the change from the 3/30/2020 line to the 11/13/2020 line in the chart above). This is normal. There is only so low that the 10-year Treasury can go, and there is only so much supply that the market is willing to soak up. This means that when there is more and more issuance, yields have to go up to entice investors to take on the risk of holding a longer-dated bond. The Federal Reserve has been doing its best to monetize the debt created by the large deficits over the past six months, and we don’t doubt it will continue to do such going forward.

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The Grammatical Grumblebug

Every successful franchise has its spinoffs. Happy Days had Joanie Loves Chachi, 21 Jump Street had Booker, and Baywatch had Baywatch Nights. Of course, On A Lighter Note wasn't immune to this trend. In what was possibly an ill-conceived idea, the On A Lighter Note writing staff worked on a short-lived spinoff called "The Grammatical Grumblebug" which was to feature brief, hard-hitting, in-your-face commentary on grammar topics.

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