The jobs deterioration comes as Covid-19 case numbers in the US continued to worsen this week. TSA traveler throughput has fallen off somewhat in early December as case counts rise. And to throw in an additional economic risk, Democrats and Republicans in Congress remain deadlocked over what should be in a new stimulus bill.
The one saving grace for this market is that the vaccine rollout begins next week. Hopefully rollout will proceed quickly and case numbers will begin to fall off. Still, I think the market is in a risky place, and we could see a sharp selloff if stimulus negotiations entirely break down. This might be a good place to hedge a bit or sell a little to reduce long exposure to stocks.
1) Trump raised the possibility of a military coup in meetings with advisors. If he attempts it, it could be economically disruptive.
2) Valuations are high, at least by most traditional measures. (Some, including CAPE creator Robert Shiller, say that historically low interest rates change the calculation.)
3) The virus has mutated in Britain to become more contagious, and the UK is being locked down.
4) A Brexit deal has failed to materialize, and no-deal Brexit draws closer.
5) Lack of financial support for state and local governments in the stimulus deal makes state and local tax hikes likely in 2021.
6) Eviction moratorium was extended for only one month and expires at end of January.
7) Unemployment extension in the deal was shorter than expected and expires in mid-March.
8) NIH is investigating rare allergic reactions to Pfizer vaccine.
Of these, I think numbers 3, 6, and 7 explain today's downturn.