November 2020 Market Insights
By: Ryan P. Johnson, CFA, CFP® – Director of Portfolio Management & Research
Recently the S&P 500 hit a new intraday high, which was driven both by some certainty around election results as well as optimism for a COVID-19 vaccine on the horizon.
The morning after election day, it seemed fairly clear that the Republican party would maintain control of the Senate. Stock markets rallied after having been positioned for a “blue wave” of Democratic control that would have led to more sweeping reforms. Gridlock has been historically favored by the stock market and the market welcomed the lower uncertainty about policies and taxes. Currently there are 50 Republican senators with two undecided seats in Georgia which will have a special election on January 5. So, while there remains a degree of uncertainty with regards to Senate control for the next two years, it is expected that at least one seat will remain in Republican control, solidifying their majority.
On November 9th, Pfizer and partner BioNTech announced the successful results of their Phase 3 COVID-19 vaccine trial, which showed 90% effectiveness. This is wonderful news for humanity. We hope and expect that several other successful vaccines will be announced in the coming days and months. The initial stock market reaction was very positive, sending the S&P 500 to a new intraday high. Stocks that had sold off the most in February and March, like travel and leisure companies, rebounded the most initially, while the work-from-home plays sold off. The high rate of effectiveness has many optimistic for a return to normal sometime next year. Additional therapeutics have also been announced, and the mortality rate seems to be improving. In the short run, however, coronavirus hospitalizations have hit new highs, and it will be several months before vaccines will help turn the tide.
Still, we are hopeful that the current recovery can remain on track. Weekly jobless claims and monthly unemployment figures continue to improve. Although interest rates have increased in recent weeks, government bond yields remain very low. The Federal Reserve again indicated it expects to keep short-term interest rates near zero for the foreseeable future. Even though the size, targets, and timing of additional fiscal stimulus is still up for debate, both Democrats and Republicans agree that something is needed to help the economy’s continued recovery.
The fiscal aid earlier this year provided an important bridge to individuals and companies during the country’s economic shutdown, yet many questions remain. On November 17th we will have a very important webinar for business owners discussing Payroll Protection Program (PPP) loan forgiveness and the significant need for proper tax planning and treatment. If you or someone you know owns a business, please click on Events at the top of our website, www.mybuckingham.com, to register.
Ryan P. Johnson, CFA, CFP®
Director of Portfolio Management & Research
RISKS AND IMPORTANT CONSIDERATIONS
Views and opinions expressed here are for informational and educational purposes only and may change at any time based on market or other conditions or may not come to pass. This material is not a solicitation to buy or sell securities and should not be considered specific legal, investment, or tax advice. The information provided does not consider the objectives, financial situation, or needs of any specific individual. All investments carry a degree of risk and there is no certainty that an investment will provide positive performance over any stated period. Equity investments are subject to company specific and market risks. Equities may decline in response to adverse company news, industry developments, or economic data. Fixed income securities are subject to market, credit, and interest rate risks. As interest rates rise, bond prices may fall. Past performance is no guarantee of future results.