Market Update – November 7, 2020

Click (less than 2 minute) video below for comments on markets and the election.

Major U.S. stock markets rose sharply this week, even though it remains unclear whether Donald Trump or Joe Biden will be inaugurated as President next January. Even in light of that major piece of uncertainty, stocks digested the election results favorably for three main reasons:

  1. The likelihood that divided government will lead to compromise solutions rather than sweeping legislative changes.
  2. The increased likelihood of another significant coronavirus fiscal relief bill becoming a reality in the near future.
  3. No voting result will affect the ultra-low interest rate environment currently helping to support stock prices.

For the week, the S&P 500 Index closed up 7.33% while the Dow Jones Industrial Average climbed 6.87%. Year to date, the S&P is up 8.63% while the Dow is down 0.75%. First-time unemployment claims fell marginally to 751,000, and continuing claims continued to track lower, falling to 7.3 million. The October jobs report showed that another 638,000 jobs were added during the past month, cutting the unemployment rate to 6.9%. One of the top priorities of whomever ultimately wins the presidency will be to assist in the continued improvement of labor markets.

This week’s election saga is an apt accompaniment to the country’s innumerable other remarkable experiences of 2020. However, key findings are becoming clearer. It is likely the House of Representatives and the Senate will be controlled by different parties – signaling divided government for at least the next two years. This, in turn, means that broad, sweeping legislative changes are unlikely; rather, more incremental compromise bills appear poised to move through the legislative process. Examples include a smaller coronavirus relief bill than the one originally proposed by Speaker of the House Nancy Pelosi, some measure of infrastructure spending for key initiatives, as well as some curtailing of the reach and scope of ultra-large technology companies.

While we reserve the right to adjust our thinking once the full elections results come into focus, nothing that happened this week has led us to change our outlook that stocks are poised for continued growth over the next few years as the world eventually recovers from the coronavirus. Unprecedented levels of support from governments and central banks will likely continue for multiple years, and corporate earnings should find their way back higher in 2021. Pairing an effective investment portfolio with a financial plan tailored to your goals and objectives remains the single most effective way for you to stay on track – regardless of whatever the future holds.

As we continue to navigate through the pandemic, our commitment remains to be here for you each step of the way. As always, please contact us with any questions about the economy and your financial plan.

We are committed to providing timely and actionable communication to our clients. If you’re looking for more financial insights, check out our detailed quarterly investment commentary. You also might be interested in two other new articles on our blog that address practical matters. One post offers tips on leveraging health savings accounts to save for retirement, while another article covers the ins and outs of avoiding cyber scams. As always, please reach out with any questions. We are here for you!

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