Market week: Stocks advance into the New Year
Building on gains as more U.S. stimulus in sight
The major U.S. stock indexes closed out the first week of trading in 2021 at record highs. The surge in investor sentiment to the risk-on trade followed a dip earlier in Friday’s session as the U.S. labor market shrank by 140,000 jobs in December and President-elect Joe Biden called for extra financial relief – a move that investors guess will be more likely now that Democrats control both houses of Congress. Despite a rising Covid-19 infection rate and death toll in the U.S. investors looked ahead to the impact of the growing vaccine rollout and more fiscal stimulus on corporate earnings in the next two quarters.
The S&P 500 Composite Index advanced 1.8% in the first week of trading in the New Year, after gaining 16.3% in 2020. Likewise, the Nasdaq Composite Index gained 2.4% on the week, powered by the continuing surge in the tech majors, adding to the 43.6% gain posted for the year in 2020.
Canada’s stock benchmark, the S&P/TSX Composite Index, rose 3.5% in the first week of the New Year, building on a rather shallow 2.2% increase for the year in 2020. An 8.7% advance in the price of crude oil helped support Canada’s energy sector, as the S&P/TSX Capped Energy Index gained 10.2% on the week. In addition, more weakness in the U.S. dollar helped Canadian index performance. Gold, typically seen as a crisis hedge, wasn’t a factor as it retreated 2.4% on the week.
* Mackenzie launches private equity-style fund. Mackenzie Investments on Jan. 8 launched its Mackenzie Private Equity Replication Fund which aims for the kinds of return and managed volatility that’s characteristic of U.S. private equity buyouts. It will include active exposure to specific industries, leverage, and volatility management.
The fund invests in U.S. publicly traded companies (as opposed to private equity) that possess characteristics similar to what private equity firms select for investments, such as high quality companies with elevated profitability that trade at attractive valuations. The aim is to outperform a broad U.S. small-mid cap index, which most closely represents the focus area for private equity. Financial leverage will be employed to resemble the process private equity firms use in leveraged buyouts, and a tail risk hedging strategy is intended to help manage volatility.
* Horizons shuts down four ETFs. Horizons ETFs Management (Canada) announced on Dec. 31 that it will be terminating four of its exchange traded funds effective at the close of business on Wednesday, March 10, 2021:
- Horizons China High Dividend Yield Index ETF (TSX: HCN)
- Horizons Cdn Insider Index ETF (TSX: HII)
- Horizons Natural Gas Yield ETF (TSX: HNY)
- Horizons US 7-10 Year Treasury Bond CAD Hedged ETF(TSX: HTH)
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