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U.S. Treasury Yield Curve Steepened Last Week

Market Data as of Week Ending 2/19/2021 unless noted otherwise.

EQUITIES
U.S. equities experienced a mixed week as most major indices finished lower. The holiday shortened week started off strong as the combination of further fiscal stimulus, continued accommodative monetary policy and better-than-expected fourth quarter earnings drove optimism higher. However, near-term inflation concerns and the recent uptick in Treasury yields appeared to weigh on risk assets. Medium and large sized company stocks outperformed their small company peers while value outperformed growth across the board. The energy sector enjoyed another positive week as the price of U.S. crude oil eclipsed $60 per barrel for the first time in over a year on Tuesday as the winter storm that swept across Texas disrupted supply. Fast growing tech stocks lagged as the increase in longer-term interest rates raised the discount rate on future earnings. Developed foreign stocks in Europe and Asia outperformed U.S stocks as shares were supported by strong earnings and better-than-expected manufacturing growth. Emerging Market stocks lagged developed foreign markets.

BONDS
The U.S. Treasury yield curve steepened last week on the back of strong economic momentum and increasing inflation concerns. The 10-year U.S. Treasury yield rose by 14bps to 1.34%, its highest level in nearly a year. Investment grade corporate bonds ended the week yielding approximately 2.0% and high yield corporate bonds are yielding nearly 4.8%.

MACROECONOMIC DATA
Economic data released during the week was mostly positive. U.S. retail sales jumped 5.3% in January, its largest increase in eight months, adding to evidence of a rebound in the economy after the most recent round of stimulus and declining COVID-19 cases. Weekly initial unemployment claims climbed to 861,000, showing that Americans are still being laid off nearly a year after the onset of the pandemic. February manufacturing data appeared to weaken as both the Philly Fed index and flash Markit PMI dipped from their January readings. However, the service sector continued its acceleration as the index rose to 58.9 in February. Japan’s Nikkei index has climbed over 30,000 amid a better-than-expected fourth quarter GDP report in which the Japanese economy grew at a 12.7% annualized pace.

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Analysts now Project Double-Digit Earnings Growth for all Four Quarters of 2021

Market Data as of Week Ending 2/12/2021 unless noted otherwise.

EQUITIES
U.S. equities finished higher across the board last week, reaching record highs as optimism was lifted by declining infections and the proposed $1.9T stimulus package. This was the last major earnings week, as 82 companies reported fourth quarter results. Currently 74% of companies in the S&P 500 have reported results, 80% of those companies have beaten EPS estimates while 78% have beaten revenue estimates, well above their 5-yr averages. Due to the strength of these results, analysts now project double-digit earnings growth for all four quarters of 2021. Small and medium sized company stocks built on their out-performance over their large company peers while value outperformed growth in large and small caps. The energy sector enjoyed another positive week as an uptick in production cuts and a drop in U.S. crude inventory drove oil prices higher. The consumer discretionary sector lagged as both Amazon and Tesla weighed on returns. Developed foreign stocks in Europe and Asia outperformed U.S stocks after being buoyed by vaccine progress and improved infection rates. Emerging Market stocks outperformed developed foreign markets.

BONDS
U.S. Treasury yields fell for most of last week as the most recent inflation data was subdued. Positive sentiment late in the week lifted the 10-year U.S. Treasury yield by 3bps, closing the week at 1.20%. Investment grade corporate bonds ended the week yielding approximately 1.9% and high yield corporate bonds are yielding nearly 4.8%.

MACROECONOMIC DATA
Economic data released during the week was mixed. The NFIB small-business index fell to 95.0, marking its lowest level since the beginning of the pandemic as small-business owners have become more pessimistic. Consumer inflation rose at its fastest pace in five months, mostly due to the rise in oil prices. Weekly initial unemployment claims jumped to 793,000, signaling that workers are still losing their jobs despite improving Covid-19 conditions. Consumer sentiment fell to a six-month low of 76.2 as hopes for a stronger economy by summer has dimmed. The UK economy expanded 1.0% in Q4, above expectations, due to strong growth in the government consumption and construction components of GDP.

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112 Companies Reported Fourth Quarter Results

Market Data as of Week Ending 2/5/2021 unless noted otherwise.

EQUITIES
U.S. stock prices rebounded from last week’s sell-off, helped by improved economic data, ongoing fiscal stimulus talks and optimistic vaccine developments. It was an active earnings week as 112 companies reported fourth quarter results. Early earnings results suggest that 69% of S&P 500 companies have beat estimates by one standard deviation, well above the 46% historical average. However, strong earnings haven’t been rewarded this quarter as companies who beat estimates have underperformed the S&P 500 the day after by an average of 100bps. Small and medium sized company stocks outperformed their large company peers while growth stocks outperformed value. All eleven sector’s enjoyed a positive week, with energy stocks outperforming as domestic oil prices hit their highest level in over a year. Healthcare shares lagged the overall market, posting a 0.50%gain. Developed foreign stocks in Europe and Asia lagged U.S stocks after a mixed week which reported a smaller-than-expected growth contraction, but disappointing earnings. Emerging Market stocks outperformed developed foreign markets.

BONDS
U.S. Treasury yields were mixed this past week as investment grade corporate bond spreads tightened. The 10-year U.S. Treasury yield rose 8bps, closing the week at 1.17%. Investment grade corporate bonds ended the week yielding approximately 1.9% and high yield corporate bonds are yielding more than 4.8%.

MACROECONOMIC DATA
Economic data released during the week were mixed and overshadowed by optimism surrounding further fiscal relief. Weekly initial unemployment claims declined to a nine-week low of 779,000, suggesting that hiring is slowly picking back up. U.S. manufacturers grew at a slightly slower pace in January as the ISM index slipped to 58.7%. The U.S. unemployment rate fell to 6.3%, reaching a new pandemic low. However, the U.S. regained a meager 49,000 jobs in January suggesting the decline in unemployment may be tied to people dropping out of the labor force. The Bank of Japan is likely to begin allowing its long-term government bond yields to rise through a reduction of long-term bond purchases.

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U.S. Stock Prices Declined Sharply Amid Heightened Trading Volumes and Volatility

Market Data as of Week Ending 1/29/2021 unless noted otherwise.

EQUITIES
U.S. stock prices declined sharply amid heightened trading volumes and volatility as markets saw the largest hedge fund de-grossing since February 2009. Fourth quarter U.S. GDP missed consensus estimates and remained below pre-pandemic levels, reflecting the continued affect of the pandemic. Company earnings continue to roll in as over one-third of companies in the S&P 500 have reported results as of the 29th. Earnings are projected to end 2.3% lower than last year, an improvement on the 4.8% decline that was expected. Large and medium sized company stocks generally outperformed their small company peers while growth versus value was mixed. Ten of the eleven sector’s posted negative returns, as real estate was the only sector to post a gain. Developed foreign stocks in Europe and Asia lagged U.S stocks due to the COVID-19 vaccine supply disagreement and the IMF’s downward revision of its UK’s growth forecast. Emerging Market stocks lagged developed foreign markets.

BONDS
U.S. Treasury yields moved lower this past week as intermediate and longer term yields declined. The 10-year U.S. Treasury ended the week at 1.09% after breaching 1.0% briefly midweek. Investment grade corporate bonds ended the week yielding approximately 1.9% and high yield corporate bonds are yielding more than 4.9%.

MACROECONOMIC DATA
Economic data released during the week were mixed and overshadowed by short-squeeze battles that triggered extreme price fluctuations among several stocks. Weekly initial unemployment claims declined to a three-month low of 847,000, as layoffs still remain extremely elevated. Consumer confidence rose to 89.3 in January as optimism surrounding the vaccine increased. Consumer spending decreased 0.2% while incomes rose 0.6% in December, suggesting consumers have money to spend once they regain confidence in the economy. Portugal announced that lockdown restrictions will be in place until mid-February, while France debates over implementing its third lockdown.

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For All its Trials & Tribulations, 2020 Delivered the 401(k) Investor a Positive Return for the Year

 

When all was said and done and the books were closed on 2020, the Mid Atlantic Trust Company Composite Benchmark finished in positive territory in three out of four quarters, providing the hypothetical 401(k) investor with a positive return for the year.

While things certainly got off to a shaky start in 2020, 401(k) investors that rode out the storm can take comfort in the fact that for the second year in a row their 401(k) balance ended up in positive territory. Out of the gate in the first quarter of 2020, the Mid Atlantic Trust Company 401(k) Benchmark dug quite a hole for itself with a 16% quarterly dip. It took a roaring 15.5% gain in the second quarter and another 6% gain in the third quarter to bring balances back into positive territory, only to be topped off by another 11.8% return in the fourth quarter to finish up at 14.85% for the year. This year can serve as a true testament as to why experts recommend 401(k) participants “stay the course” even during the most turbulent markets.

 

 

 

 

In comparison to the major market indices, the Mid Atlantic Trust Company 401(k) Benchmark was outpaced in the fourth quarter only by the Nasdaq composite, which continued its impressive run to finish up the year at a remarkable 43.6% return for the year.

 

 

 

 

ABOUT THE MID ATLANTIC 401(k) BENCHMARK
Mid Atlantic Capital Group is a leading financial services organization that provides a wide array of brokerage, advisory, and trust services to a diverse national client base of financial advisors and institutions, asset managers, and benefits administrators through its various subsidiary companies. Because we provide these services, Mid Atlantic Trust Company has plan investment data on approximately 95,000 401(k) plans representing approximately $100 billion in assets. Data used for this benchmark uses approximately 35,000 of those plans (see fact sheet for further information on actual sample). In response to requests from our institutional clients, we have created the Mid Atlantic Trust Company 401(k) Composite Benchmark which is designed to reflect the portfolio performance across 401(k) plans serviced, in any capacity, by Mid Atlantic.

For a copy of the full report of the Mid Atlantic Trust Company 401(k) Composite Benchmark, 401k Benchmark 4Q 2020.

Contact Mr. Scott Hervoyavich of Mid Atlantic Trust Company at 800-693-7800 or by emailing him at shervoyavich@macg.com

* For the hypothetical participant balances, we used a starting balance based on the average 401(k) participant balance provided by the Investment Company Institute for the year of the starting balance. In our calculation, we assumed a starting annual salary of $50,000, a combined employee/employer 9% annual contribution rate, and a 3% annual salary increase and applied the monthly rate of return of the benchmark.

Economic Data Released During the Week were Mixed and Overshadowed by the Change in Administration

Market Data as of Week Ending 1/22/2021 unless noted otherwise.

EQUITIES
U.S. stock prices advanced as the outlook improved for corporate earnings and prospects for a new stimulus from the Biden administration. Despite the near term improvement, S&P 500 earnings are still expected to decline 4.7% for the fourth quarter 2020. Small and medium sized company stocks generally outperformed large company peers and growth stocks outperformed value. Sector performance was led by gains in the communication services, information technology, and consumer discretionary sectors. The remaining eight major economic sectors lagged, most notably the cyclical sectors such as energy, materials, and financials. Developed foreign stocks in Europe and Asia lagged U.S stocks, while Emerging Market stocks outperformed developed foreign markets.

BONDS
U.S. Treasury yields were mixed this past week as shorter term yields declined and longer term yields were mostly unchanged. Short duration bonds generally outperformed long duration peers and high yield corporate bonds were the best performing asset class. Investment grade corporate bonds ended the week yielding approximately 1.9% and high yield corporate bonds are yielding more than 4%.

MACROECONOMIC DATA
Economic data released during the week were mixed and overshadowed by the change in administration. Weekly initial unemployment claims declined, but remain elevated at 900,000, as the labor market struggles to recover this winter. More than 5 million Americans continue to claim ongoing unemployment benefits. Existing-home sales were reported at a seasonally adjusted annual rate of 6.76 million, a 22% increase compared to the same period last year. Lack of supply for existing home sales has been driving prices higher as the inventory is less than two months, the lowest level since 1982. European countries continue to extend coronavirus lockdowns. Germany announced that lockdown restrictions will be in place until February 14. Business activity has been declining throughout the region as lockdowns weighed on the services sector.

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Investors Balance the Expectation of Additional Government Spending with the Duration of the Economic Recovery

Market Data as of Week Ending 1/15/2021 unless noted otherwise.

EQUITIES
U.S. stock prices were mixed as President-elect Joe Biden announced his plans for a $1.9 trillion stimulus package and President Trump was impeached for a second time by the House of Representatives. S&P 500 earnings have improved, but are still expected to decline 6.8% for the fourth quarter 2020. Small and medium sized company stocks outperformed large company peers and value stocks generally outperformed growth. Sector performance was mixed as energy maintained a leadership position along with gains in the real estate, utilities, and financials sectors. The communication services, information technology, consumer discretionary, and consumer staples sectors lagged. Developed foreign stocks in Europe and Asia narrowly lagged U.S stocks, while Emerging Market stocks outperformed developed foreign markets.

BONDS
U.S. Treasury yields declined this past week as investors balance the expectation of additional government spending with the duration of the economic recovery. Longer duration bonds generally outperformed short duration peers and investment grade corporate bonds were the best performing asset class. Investment grade corporate bonds ended the week yielding approximately 1.9% and high yield corporate bonds are yielding more than 4%.

MACROECONOMIC DATA
Economic data released during the week were generally worse than expected. Weekly initial unemployment claims increased to 965,000, the highest level in more than five months, and more than 5 million Americans continue to claim ongoing unemployment benefits. Retail sales declined 0.7% in December, which was the third consecutive monthly decline after revisions. Germany reported preliminary data that the economy contracted 5.0% in 2020, which was better than expected. The Bank of Japan reported that the economy was improving despite the recent coronavirus cases.

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U.S. Stock Prices Advanced as Several Major Indexes Ended the Week on Record Highs

Market Data as of Week Ending 1/8/2021 unless noted otherwise.

EQUITIES
Despite the chaos at our nation’s Capitol, U.S. stock prices advanced as several major indexes ended the week on record highs. Earnings expectations improved throughout the quarter and into the new year. However, S&P 500 earnings are still expected to decline -8.8% for the fourth quarter 2020. Small and medium sized company stocks outperformed large company peers and value stocks generally outperformed growth. Sector performance was mixed as energy stocks rotated into a leadership position and were up more than 9%. The materials, financials, and consumer discretionary sectors outperformed, whereas defensive sectors such as real estate, utilities, and consumer staples lagged. Developed foreign stocks in Europe and Asia outperformed U.S stocks, while Emerging Market stocks outperformed developed foreign markets.

BONDS
U.S. Treasury yields increased this past week as the democratic candidates won both Senate seats in Georgia and effectively control both houses of Congress. Long-term yields increased to their highest levels since March of last year as the 10 year U.S. Treasury note rose 0.20%. Longer duration bonds lagged short duration peers and high yield corporate bonds were the best performing asset class. Investment grade corporate bonds ended the year yielding approximately 1.9% and high yield corporate bonds are yielding more than 4%.

MACROECONOMIC DATA
Economic data released during the week were mixed but largely overshadowed by the Senate runoff in Georgia and turmoil in Washington. Employers cut 140,000 jobs in December, ending seven months of job growth as new coronavirus cases pose challenges for a sustainable recovery. Weekly initial unemployment claims were unchanged at 787,000 and more than 5 million Americans continue to claim ongoing unemployment benefits. Germany reported better than expected industrial production and trade data in November, meanwhile Italy seeks more than EUR 200 billion from the EU’s coronavirus emergency fund.

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Most Major Economic Sectors Finished the Week in Positive Territory

Market Data as of Week Ending 12/31/2020 unless noted otherwise.

EQUITIES
U.S. stock prices were mixed as several major indexes ended the year on record highs, but smaller company stocks declined and erased some of the outsized gains from the quarter. Despite small company stocks’ poor performance during the week, they were up more than 30% during the quarter and narrowly outperformed the S&P 500 for the calendar year. Value stocks finished the year with a surge and outperformed growth last week, but they still lagged growth stocks by more than 30% in 2020. Most of the major economic sectors finished the week in positive territory as defensive sectors, such as utilities and real estate outperformed. Developed foreign stocks in Europe and Asia outperformed U.S stocks, while Emerging Market stocks outperformed developed foreign markets.

BONDS
U.S. Treasury yields declined this past week as it became more unlikely that Congress would approve a supplemental stimulus to increase payments to $2,000 for individuals. Longer duration bonds outperformed short duration peers and high yield corporate bonds were the best performing asset class, followed by investment grade corporate bonds. Investment grade corporate bonds ended the year yielding approximately 1.8% and high yield corporate bonds are yielding more than 4%.

MACROECONOMIC DATA
Economic data released during the week were mixed but largely overshadowed by coronavirus cases and related economic stimulus programs. Weekly initial unemployment claims dropped to 787,000 and approximately 5.2 million Americans continue to claim ongoing unemployment benefits. Lower housing inventory continues to present challenges as the November pending home sales unexpectedly declined 2.6%. The United Kingdom completed its formal separation from the European Union at the end of the year and complications are expected as new trade rules are implemented. The resurgence in new coronavirus cases has challenged Japan from both a domestic and trade perspective. The country reported weaker than expected industrial production and retail sales declined in November.

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Most Major Indexes Reached New Highs as Coronavirus Vaccines were Administered

Market Data as of Week Ending 12/18/2020 unless noted otherwise.

EQUITIES
U.S. stock prices advanced and most major indexes reached new highs as coronavirus vaccines were administered and the government closes in on a $900 Billion stimulus bill. Small and medium sized company stocks generally outperformed large company peers and growth stocks outperformed value. Sector performance was mixed as energy stocks rotated out of a leadership position and were down more than 4%. Information technology, consumer discretionary, and the materials sectors outperformed while defensive sectors such as communication services, utilities, and consumer staples lagged. Developed foreign stocks in Europe and Asia narrowly outperformed U.S stocks, while Emerging Market stocks lagged developed foreign markets.

BONDS
U.S. Treasury yields rose this past week as the Federal Reserve (Fed) voted to maintain monthly bond purchases of at least $120 billion and reaffirmed their commitment to keeping short term borrowing rates near zero through 2023. High yield corporate bonds were the best performing asset class while Long-term government bonds were down more than 1%. Investment grade corporate bonds are yielding approximately 1.8% and high yield (below investment grade) corporate bonds are yielding more than 4.5%.

MACROECONOMIC DATA
Economic data released during the week was worse than expected but largely overshadowed by the virus and prospects of a fiscal spending package. Weekly initial unemployment claims increased to 885,000 which is the highest level in three months and approximately 5.5 million Americans continue to claim ongoing unemployment benefits. Housing continues to be an area of strength as single-family starts rose for the seventh consecutive month to an annualized rate of 1.2 million, the highest since 2007. Several leaders in Europe had to quarantine themselves after French President Emmanuel Macron developed COVID-19 symptoms and lockdowns were tightened throughout parts of Germany and the UK.

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