Stocks Soar Amid Election Uncertainty, Labor Improves, Covid-19 Surges Again
In today’s Steady Investor, we look at key factors that we believe are currently impacting the market, such as:
- Why the stock market soars amid election uncertainty
- Labor market improves, but a major headwind may be returning – Covid-19
- Services and manufacturing are improving key indicators for the U.S. economy
Stock Market Soars Amid Election Uncertainty – The U.S. stock market has defied expectations, and gravity, for just about all of 2020. The S&P 500 hit its bear market bottom on March 18, 2020, when forecasts for unemployment were north of 20% and GDP was set to contract by -30%.1 Corporate earnings were also expected to post severe drops, and we knew very little about how long the pandemic would persist. Fear was at a crescendo. Then stocks went up. Way up. Indeed, in this bull-bear cycle, the S&P 500 took only 126 trading sessions to post a full recovery. The previous record for a bear market recovery was set in 1966-1967, when it took 301 days for the market to recover. Since 1928, it has taken an average of six years for the stock market to recapture all-time highs.2 The stock market defied expectations, and as is very often the case, investor patience during a very turbulent and uncertain period was rewarded. Enter the election, where the S&P 500 has defied expectations of wild swings and instead has pushed convincingly higher even as the outcome hangs in the balance. Investors appear to be betting on a divided government, which would mean a falling likelihood of sweeping tax reform (higher corporate taxes) and major new regulations on big technology companies. Even still, the likelihood of fiscal stimulus seems all but assured, not matter what the presidential outcome.
With most investor’s attention focused on the election outcome, many may take for granted just how critical the vaccine is to a full economic recovery. A lot can go right, but a lot can also go wrong – will the vaccine be effective, will the rollout be smooth, will enough shots be available, will enough Americans take it?
To help you get answers to these questions and more, we have created our just-released November Market Strategy Report. In this report, we look at companies working on the vaccine and antibody medicines. You will also see our analysis on the major companies involved, with Zacks stock ratings included in our commentary.
If you have $500,000 or more to invest and want to learn more about the impact a vaccine could have on the market, click on the link below to get your free report today!
Download Our Just-Released November Market Strategy Report3
Trickling Improvement in the Labor Market – The number of Americans applying for unemployment continues to hit 700,000+ per week, which actually marks an improvement from previous weeks and signals the labor market is improving, albeit very modestly.4 The key with initial jobless claims, historically, is that it continues to trend down from its recession peak. Markets have historically bottomed around the time that initial jobless claims peak, which also applied to 2020’s pandemic-induced recession. The labor market is improving and the economy is growing again, but a major headwind may be returning – Covid-19. Daily cases have topped 100,000 for the first time ever, and with cold weather on the way, Americans will be forced indoors – where the virus can spread more easily. Small businesses that have been making do with outdoor dining and socially-distanced indoor dining are likely to face major challenges to growth. The potential upshot, however, is that a stimulus package is almost certainly on the way. It’s just unclear when.
Silver Linings in Services and Manufacturing – Services and manufacturing are key indicators for the U.S. economy, and purchasing managers indices for both posted improvement in October – a good sign. On the manufacturing side, U.S. factories reported a sharp rise in new orders as business inventories shrank, which spurred manufacturers to increase hiring for the first time in over a year. The Institute for Supply Management, which runs the survey, stated that sentiment among manufacturers was very strong. On the services side, continued growth in activity was reported in October as businesses in health care, hospitality, real estate, and dining all showed strong activity for the month. The index reading for services came in above 50 for the fourth straight month, and was accompanied by expansionary readings across Europe and Asia.
A Look at Covid-19 Vaccine Development – With investor attention focused on the election outcome, many may take for granted just how critical the vaccine is to a full economic recovery. A lot can go right, but a lot can also go wrong – will the vaccine be effective, will the rollout be smooth, will enough shots be available, will enough Americans take it?
To help you get answers to these questions and more, we have created our just-released November Market Strategy Report. In this report, we look at companies working on the vaccine and antibody medicines. You will see our analysis on the major companies involved, with Zacks stock ratings included in our commentary. We will look at:
- How could a vaccine impact the markets?
- A look at major companies in the fight against Covid-19
- Why we have optimistic outlook for 2021?
This report dives into what a vaccine could mean for economic recovery. If you have $500,000 or more to invest and want to learn more, click on the link below to get your free report today!
2Wall Street Journal. September 15, 2020. https://www.wsj.com/articles/why-did-stock-markets-rebound-from-covid-in-record-time-here-are-five-reasons-11600182704
3 Zacks Investment Management reserves the right to amend the terms or rescind the free Market Strategy Report offer at any time and for any reason at its discretion.
4Wall Street Journal. November 5, 2020. https://www.wsj.com/articles/weekly-jobless-claims-coronavirus-11-05-2020-11604529388?mod=hp_lead_pos2
5Wall Street Journal. November 4, 2020. https://www.wsj.com/articles/covid-19-surge-forces-europeans-to-stay-home-dragging-on-economy-11604490633
6 Zacks Investment Management reserves the right to amend the terms or rescind the free Market Strategy Report offer at any time and for any reason at its discretion.
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