(New York)

The brick and mortar electronics store GameStop experienced an internet fueled rally this January with the stock prices closing at $147 on Tuesday. The surge was primarily driven by the “wallstreetbets” subreddit, an internet message board. Trading on Gamestop was paused 9 times on monday in order to halt the perceived hysteria. Short sellers are nowhere near dropping off despite having a mark to market loss of more than $5 billion. In fact, shorted shares have increased to over 900,000 in the last week which brings their value of the position to $69million. On the message boards one redditor posted screenshots of their own return at over$1000.

FINSUM: Frenzied bubbles are not an exception in markets and are recorded back to the17th century, however the driving force being a small message board on the internet does make this unique. The stock did experience strong growth in the 4th quarter of 2020 in part as response to the release of new video gaming consoles, but this rapid rise has more to do with memes than it does with fundamentals.

(Washington, D.C.)

Yellen, former chairmen of the Federal Reserve, was confirmed by the Senate in her nomination for secretary of the treasury. The 84-15 vote reflects both Republicans willingness to work with the Biden administration on economic issues, and Democrats desire to brand their own economic reactions to the covid crisis. Yellen, previously at Brookings Institution, has a decorated history in public service working for Clinton administrations council of economic advisors, CEO of San Francisco regional federal reserve bank, and chair of the Federal reserve. Yellen faces many challenges in her role as treasurer both with the current state of the economy and the looming U.S. debt. Yellen plans to work closely with current Federal Reserve Chairman Jerome Powell to address the U.S. economy.

FINSUM: Yellen historically is known for reading the economy through the lens of the labor market, so expect her policy guidance to be especially informed through a variety of labor market indicators. Additionally expect Yellen’s policy to be more expansionary than a previous administration, but she is weary of the U.S. current debt and has denounced the large deficits supported by Modern Monetary Theory.

(New York)

Goldman Sachs has been leading Wall Street in its bullish outlook for 2021. The bank has been forecasting 6.6% GDP growth, a full 2.5% above the consensus forecast. However, the bank just published a note which represents the first backtrack on that call. The bank pointed out that the new strains of COVID could pose a risk to growth. In particular, they explained that if the current vaccines do not give a high degree of protection against the new COVID strains, then the spending boom which they forecasted this year might be delayed to 2022. In the bank’s own words, if the new strains require a new vaccine “Virus-sensitive spending would likely retrench while a new vaccine is developed, and although a new vaccine could be approved in less than five months, the consumption boom would likely be delayed until 2022”.

FINSUM: We are sure they made this admission with some frustration as GS has been quite bullish. That said, they did so because it is very realistic. It should be noted that most authorities say that the current vaccine should cover the new strains.

(New York)

With interest rates so low there has been increasing interest in the role that annuities can play for those near or entering retirement. Bonds just aren’t playing the dual roles of safe haven and income source that they once did, and annuities are a naturally inheritor of that role for the foreseeable future. However, one thing that many are not clear about is how well fixed and variable annuities can work together. While fixed annuities offer guaranteed income, they are susceptible to inflation. Accordingly, many retirees might also want to have some upside that will allow their payouts to move higher. Enter variable annuities, which can offer enhanced income in up markets (but do risk lower payments in down markets).

FINSUM: Fixed and variable annuities work well as a pair. The portion invested in fixed offers guaranteed income, while the variable portion offers upside potential.

(Washington)

Munis bonds have done well recently, but the ultra-low rate environment seems to have confused many about their relevance. It is critical to remember that despite yields being so low, munis still very much have a place in the environment. In fact, one could argue the current environment is better for munis than a more conventional one. The reason why is that munis still have a major spread advantage versus taxable equivalents. For example, while munis only yield an average of 0.86% right now, that translates to a taxable yield of 1.53% for those in the top income bracket. However, as we all know, Treasury yields are still much nearer to 1%, meaning munis current enjoy a major advantage over taxable bonds.

FINSUM: Given Biden and the Democrats’ support of state and local municipalities, and munis’ currently yield advantage, there is no reason for the asset class not to have a great year.