Todd’s Take on the Market
Global equities soared last week after news of a breakthrough in the search for a COVID-19 vaccine but were tempered during the week as cases hit new highs and uncertainties arose around the realities of a future vaccine deployment. In the US, the S&P 500 ended up 2.21% despite increased lockdown measures and some continued political noise following the previous week’s election. European equities also rose, with the Eurostoxx 600 and FTSE 100 gaining 5.16% and 7.04%, respectively.
While the ominous rise in case counts suggests an even greater human toll in the months ahead, given that the inherent value of stocks depends on future earnings over many years, equities have been more sensitive to vaccine prospects rather than current case counts. Last week, promising news around a potentially highly effective COVID-19 vaccine led to a broad style rotation in stocks, with value outperforming growth. Last week, alone, small-cap value stocks were up an amazing 9.2%, while small-cap growth stocks only gained 3.4%—still not bad for our growth stocks, but an incredible difference.
On the economic front, The FED is concerned about the virus—“From our standpoint, it’s just too soon to assess with any confidence the implications of the news for the path of the economy, especially in the near term,” Powell said regarding the vaccine. “With the virus spreading, the next few months could be challenging.”
JOBS: US initial jobless claims fell to 709k for the week ending November 6, lower than consensus expectations and the fourth consecutive week of declines. However, claims remained above the pre-pandemic record of 695k in 1982. Continuing claims for the week ending October 31 fell to 6.79m, declining 436k from the prior week. Despite those improvements, the Job Openings and Labor Turnover Survey (JOLTS) for September showed little change in job openings at 6.4m, below expectations, and a decline in hiring to 5.9m due to a decrease in temporary federal government hires after the 2020 census.
The latest inflation data shows that the only thing climbing is food prices. Core CPI showed only a modest rise yet food prices continue to surge.
Earnings season is winding down, but it has been a good one. The analysts had been more bearish than what turned out.
This week, we will get a few earnings reports, and a bit of economic data, but for now, the markets are focused on the Coronavirus and how the rise in cases, hospitalizations and deaths will impact the economy in months to come.
Please stay tuned and we will keep you posted.
Todd Day, MBA
Horizon Financial Services, LLC