November was a very strong month in the U.S. equity markets, in fact one of the strongest months since 1987. And all three major indices hit all-times highs during the month as the Dow surged 12.14%, the S&P 500 rose 10.95% while the NASDAQ was up 11.91%. It was certainly a “risk on” month when investors were richly rewarded for sticking with their positions in stocks, both in the U.S. and abroad. The MSCI EAFE, which tracks international stock, gained 15.5% and the MSCI Emerging Markets index was up 9.25%.
Falling interest rates provided positive returns in the bond market as well. The Bloomberg Barclays U.S. Aggregate Bond Index gained 0.98% in November, which helped generate solid returns in balanced portfolios. High yield bonds, measured by the Bloomberg U.S. Corporate High Yield Index, rose 3.96% as high yield bonds tend to be more highly correlated to the U.S. stock market.
So, what is the “landscape” going forward? Without question is all about COVID, both from a public health standpoint and its affect on the domestic/global economy from an impact standpoint. We saw continued growth in daily testing throughout November, and the positive test rate began to decline by month’s end. Although the positive test rate remains above the World Health Organization’s target of 5%, there are signs that we are moving in the right direction.
The challenge right now seems to be the race to get a safe and effective vaccine as the number of infections grows daily. Now that Thanksgiving travel is over and we head into the holidays, we will have to wait and see if the uptick in case count continues. Meanwhile, Moderna, Pfizer and AstraZeneca continue to seek approval from the FDA for the manufacture and distribution of their versions of a COVID vaccine.
The lockdowns and other restrictions as a response to containing COVID have certainly taken an economic toll as businesses small and large struggle to remain viable. Although the U.S. economy continued to grow in November, the rate of growth in slowing and there are signs that the rising case count may act as a headwind for faster economic growth. Consumer spending, a major factor in GDP, continues to grow while October’s retail marked its lowest monthly growth since the lockdowns were lifted.
We believe the economy will continue to grow albeit at a slower rate for the balance of 2020. With the widespread distribution of a COVID vaccine hopefully beginning in the first quarter of 2021, we should see a revitalization of the U.S. and global economies in the months to follow – and the investment markets are likely to enjoy that recovery.