Broker Check

Market Commentary

November 11, 2020

In honor of all the men and women who have served and continue to serve our country in the Armed Forces, we wish you a Happy Veterans Day. Thank you for your sacrifice and service to fight for and protect our Freedom. 

 

Rough end to October for stocks, but
markets rally during election week

October is known for its historic volatility. While this October had a strong positive start, rising COVID-19 cases across the globe prompted fears of new lockdown measures in Europe. Combined with the uncertainty of the upcoming Presidential election, the result was a rough ending to the month. Global stocks fell over 5% in the final week erasing those early gains and pushed stock returns into negative territory for the second straight month.

On a bright note, small- and mid-cap stocks went against the grain and, despite the late downturn, posted gains of 2.1% each for the month though remained in negative territory year-to-date. Emerging market stocks also edged 2% higher in October. The benchmark S&P 500 dipped 2.8% in October but remained positive for the year at +1.2%. Same for the tech-heavy Nasdaq, which slipped 2.3% for the month but remained up a strong 21.6% for the year, tops among developed markets.

Foreign markets dipped 4.1% in October, fueled by the rising COVID-19 cases noted earlier as well a reminder that Brexit risk is still prevalent, when a mid-month meeting failed to reach an agreement.

Even bonds weren’t spared in October. Interest rates rose across the yield curve, particularly intermediate to long-term, as pre-election polls suggested a possible Democratic “Blue Wave” on November 3, which could prompt additional fiscal stimulus and government spending. This raised inflation concerns, suggesting the Fed may increase interest rates sooner than expected. The Barclays Bloomberg Aggregate Bond Index dipped 0.5%, while the 10-year Treasury note yield rose 19 basis points in October to 0.88%, the highest yield since June.

October Quick Takes:

  • Stocks across the globe fell in October for the second straight month
  • Small-caps, mid-caps and emerging market stocks were the lone standouts with gains
  • US interest rates edged higher to levels not seen since June
  • Rising COVID-19 cases across the globe prompted new lockdown fears in Europe and combined with US Presidential Election uncertainty November 3, raised volatility late October


November Update: Global Markets rallied strongly during Election Week, resulting in the best week for stocks since April

As many expected, Americans didn’t know the results the night of the Presidential Election as vote counting went late into the night. The uncertainty and drama dragged on for the remainder of the week yet stocks across the globe rose sharply, save for Friday, in what would be the best week for stocks since April. It was also the best election week for the S&P 500 since 1932, according to CNBC, as it became more certain that Congress would likely remain split thus resulting in more gridlock trying to pass large policy changes.

Over the weekend, the Associated Press and major networks called Pennsylvania and projected former Vice-President Joe Biden surpassed the 270 Electoral College threshold to win the 2020 US presidential election. While recounts and legal proceedings by President Trump contesting the outcome remain and could add to volatility, including Senate run-offs in Georgia, the markets have discounted known risks and projected results and have responded positively.

Vaccine News Sparks Rally

Surprising the markets on November 9th, with great news for humanity across the globe, Pfizer announced that its vaccine is over 90% effective providing immunization protection against COVID-19. The long-awaited news put a charge in the financial markets as stocks surged across the globe. US stocks posted gains of 1-3% across the board, except for the tech-heavy Nasdaq which dipped 1.5% on the day.

The Outlook

Whether you are a Republican, Democrat or Independent, emotions remain high following the outcome of the November 3rd U.S. presidential election. It took 5 tension filled days to determine Joe Biden as the projected winner of the 270 Electoral College votes needed to win the presidency. As Americans, we can all be proud of the vested turnout in the 2020 election during a global pandemic. NBC News reported that the projected turnout of at least 159.8 million voters resulted in the most votes cast in US history and the highest voter turnout rate of eligible voters since 1900.

While past performance is no guarantee for future success, an analysis from Strategas shows that post-election returns from November through December (1948-2017, S&P 500 Cumulative % Return)  have historically been positive on average, regardless of the outcome. We remain cautious on the market in the short-term surrounding the Presidential Election and post-election rally, as well as increasingly concerning COVID-19 case trends heading into winter but are more optimistic long-term given the exciting vaccine news that has provided a needed bright light at the end of the tunnel.

We continue to urge discipline and remain focused on your long-term objectives post-election.

  • Don’t get complacent with risk
  • Refrain from chasing returns and making large portfolio changes
  • Don’t let the election results affect your long-term objectives
  • Maintain diversification and discipline
  • Stay patient with your investment strategy and program
  • Remain Positive, Stay Safe and Stay Healthy

From all of us at Nelson Securities, we continue to wish you and your family good health and well-being as the Holiday Season approaches. 

Call your Nelson Advisor today at 800-345-7593 to discuss any concerns and review your portfolio.  

~Your Nelson Securities Team   

*Past Performance is No Guarantee for Future Results