There have been so many market, health and political events since the beginning of November that we delayed the publishing of this newsletter to capture as much as possible.
First, looking back at October, the global equity markets were down for the most part after a late month sell-off on rising coronavirus infections and concerns over the outcome of the election. Despite the virus and elections worries, the U.S. economy held up relatively well. Re-employment from the virus lockdowns continued, job layoffs were down, and consumer and business confidence remained solid.
Although the 2020 Presidential election is behind us, several legal challenges have been filed by the Trump administration. So far, the equity markets seem to be taking the prospect of a contested election very well - which was not the case in the 2000 Presidential election. In that election, former Vice President Al Gore challenged the vote in Florida and led to what will forever be remembered as the “hanging chad.” During this period, the S&P 500 dropped 8% which is our concern during the current challenge process.
New COVID cases have eclipsed the 120,000 per day level, sending concerns for the potential of additional lockdowns through the U.S. Some countries in Europe have already instituted total lockdowns of their economies. Then came the announcement from Pfizer that they had created a vaccine which was reported to be more effective than anyone had thought possible. With more than 90% effectiveness in late-stage trials, Pfizer has greatly advanced the fight against the virus.
The global equity markets soared on the news of the vaccine. In a single day, we went from having no vaccine to possibly having several which is news the markets need to advance as this addressed a major concern that held them back in October. Now it will be a race to ensure the safety of the vaccine, get it approved for use and to produce and distribute the vaccine as the COVID case count continues to rise.
The good news is that the solid economic recovery so far is likely to benefit from the development of the vaccine, and economic recovery should in turn benefit the investment markets as well. We do, however, expect continued volatility in the markets at least over the next month as investors focus on the immediate threat of the virus. Political worries are likely to intensify with both the Presidency and Georgia Senate seats on the line. Whatever plays out in the political and economic arenas is likely to play out in the investment markets.