November 21, 2020 Weekly Market Update. After two weeks of strong equity rallies the markets took a breather with mixed returns: The Nasdaq +0.22%, the Dow Jones -0.73% and the S&P 500 -0.77%. Indeed, the capital market performance on the week was emblematic of mixed Covid-19 virus implications with positive vaccine news countered by sharp upticks in infections across the U.S. and, the world at large. The economic toll is already playing out with certain states re-implementing partial shutdowns and curfews. Looking ahead, we are moving into corporate earnings season and ponder how Congress will bridge the great stimulus (phase 4) divide between the Senate at $500 billion and the House at $2.2 trillion.
November 14, 2020 Weekly Market Update. On approved Covid-19 vaccine being 90% effective, equity markets rallied with the Dow Jones leading the charge +4.08% followed by the S&P 500 +2.17% and Nasdaq +0.55%. Since 1950-1999 the period of Oct 27th thru Jan 18th has demonstrated to be one of the strongest seasonal return periods for the year with the average return being around +3%; even higher at about +4% in election years such as 2020. It is obvious that a vaccine is critical to an economic recovery as echoed by Fed Chair Powell on Thursday: “We do see the economy on solid path of recovery. The main risk is the further spread of the disease.” U.S. initial jobless claims dropped roughly -48k to 709k for the week of November 7th.
November 7, 2020 Weekly Market Update. Last week’s losses were more than recovered with the biggest U.S. equity market rally since back in April with the Nasdaq +9.01% taking the lead, followed by the S&P 500 Index +7.32% and the Dow Jones Industrial Average +6.87%. The equity markets celebrated the likelihood of a GOP Senate majority throwing a roadblock to a perceived onerous Biden tax regime and potential unfriendly business regulation stance. On the S&P 500 corporate earnings front, reporting continues to exceed expectations and of the 235 companies that have reported, 88 companies have raised forward-looking guidance. For example, companies such as Estee Lauder, Coca-Cola and General Motors earnings show a benefit from strong consumer spending (related to past stimulus). JPMorgan said it expects a 54% upside potential in the S&P 500 from current levels, based on investors' average under-allocation to stocks in their portfolio. Looking back further, according to a McLean Retirement Insights article, from 1926-2019 the S&P 500 produced an attractive average annual return of +9.12% under a Republican presidency. However, under a Democratic presidency, the result was even better with a +14.94% return.