Stock Market Recap: Week of Jan. 3-9, 2021

What Happened in the Market (and the World) This Week?

To sum up, it was an emotional rollercoaster.

To begin, the market had a nice early pop in the first half-hour of trading to start off 2021 and then it went all downhill from there that day. If I had to make a guess, it was a combination of profit-taking before the Georgia special election on Tuesday and a continuation of the slight sector rotation we saw happening the last week of December last year.

Regarding the special elections, I think final polling showed both Democrat candidates slightly favored to win both senate seats which would set the Democrats up for a very slight senate majority with Vice President-elect Kamala Harris being the tiebreaker in a split senate. With a Democrat-controlled senate and house, I think a lot of investors (myself included) thought the market would sell off due to President-elect Joe Biden proposing higher corporate income taxes and increasing capital gains taxes. It definitely seemed to play itself out that way when both Democrat candidates were favored to win after the election early Wednesday morning in futures trading with the S&P 500 and Nasdaq both being down north of 2% in the wee hours of Wednesday morning.

On Wednesday, the markets opened not nearly as bad as the Futures were predicting, in fact actually rose pretty strongly for the day since I think people realized that perhaps a Democrat majority wouldn’t be so bad with the prospect of an increased stimulus, green clean energy initiatives, and the fact that while it’s a Democrat majority, it’s not a super majority, so there will likely need to be some level of compromise in all future legislation. Also, President-elect Joe Biden would likely have a better handle on the coronavirus and vaccine distribution which should help get the economy back to normal.

Then Wednesday afternoon happened. All I can say is that this was incredibly F’d up and incredibly dangerous to our nation’s democracy.

The markets definitely took a slight dive with the news on the assault on our nation’s Capitol, but ultimately finished green for the day. The next two days, I think investors were just happy to have the election fully over with Congress confirming Joe Biden’s victory early Thursday morning. There was definitely a lot of euphoria in the markets Thursday after Congress finally put an end to all of the misinformation and confirmed Joe Biden’s victory.

The Bureau of Labor Statistics released December’s Job report on Friday morning where the unemployment rate remained the same at 6.7% but there was a 140,000 decline in payroll employment largely due to COVID being uncontained in the United States and resulting in more lockdowns or more measures to mitigate the spread of COVID. It basically confirmed what the media was saying that there has been a slowing of the economic recovery because COVID still has not been contained effectively. 

I’ve actually never reviewed the BLS’ jobs report before and have historically only heard recaps of it from the various podcasts and news sources. I decided to look into it for once and found some interesting data points:

  • The Leisure & Hospitality sector lost 500k jobs and is down 23.2% or 3.9 million versus the employment numbers in February 2020’s pre-covid Jobs report.
  • Professional and business services gained 161k jobs
  • Total nonfarm payroll employment for October and November were revised for a 135k gain
  • Civilians with a college degree or higher saw their unemployment rate drop from 4.2% to 3.8% seasonally adjusted month to month but was still higher than December 2019’s 1.9% unemployment.
  • Civilians with less than a college degree saw their unemployment rate increase from 9.2% to 9.8% month over month and finished the year significantly higher than December 2019’s 5.3% unemployment rate (seasonally adjusted)
  • White civilian unemployment on a YoY comparison (Dec ‘19 vs. Dec ‘20) went from 3.1% to 6.0%
  • Black civilian unemployment on a YoY comparison went from 6.2% to 9.9%
  • Asian civilian unemployment on a YoY comparison went from 2.6% to 5.9%

There’s a lot more data points in this report, in fact there are 25 tables covering a broad range of statistics about the United States’ workforce.

My POV on this jobs report is that it wasn’t unexpected that the economic recovery is slowing considerably given that the pandemic continues to rage across the United States. However, there is a lot to be optimistic about in the future which I think the market is starting to price in given its huge bounceback from the start of the week and its shrugging off a pretty meh jobs report. Increased stimulus, student loan forgiveness, clean energy initiatives (more on that in a bit), better COVID mitigation leadership, and a vaccine to name a few.

Regarding clean energy initiatives, I need to say OMFG because ever since Joe Biden was elected as the next President of the United States back in November, solar stocks have gone insane. One stock, in particular, Enphase Energy ($ENPH) has literally doubled and then some since the election. Who would have thought? (Hah, actually my wife did, she told me she was interested in solar stocks back before Tesla acquired SolarCity).

My Trades for the Week

I definitely bought on the dips Monday and Tuesday for some of my core holdings: $DOCU, $ZM, $ETSY and $CRWD. I also closed out on some Put writes that were set to expire sometime in 2021 to free up margin and as precaution just in case the market sold off on Tuesday. 

I bought a 2023 $230 $TDOC call option also since I saw that Cathie Wood was loading up on $TDOC in late December and after reading a lot about $TDOC’s future, figured it would be worth a position for at least a few years. I’ll be honest, this position I initiated was not done with the normal due diligence that I generally conduct when starting a bigger position, but I figure I have a few years. I’ll probably do a deep dive later.

Finally, I sold some deep in the money $SFIX options to free up some cash since I plan on exercising a few DocuSign 2021 call options later in the month.

Next Week’s Plan

I’m still looking to trim a few positions that I believe have reached a valuation that may be a headwind to their future share price appreciation (at least in 2021). Also, will be monitoring a few options I have that are set to expire on January 15, 2021.

Other Tidbits

  • Bitcoin ($BTC) crested $40k
  • Ethereum ($ETH) is nearly back to its ATH of $1,391 finishing around $1,250
  • Stellar ($XLM) cryptocurrency doubled from $0.15 or so to $0.30 by the end of the week.

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