ND&S Weekly Commentary )Weekly Commentary (11/16/20) – Markets Mostly Higher on Vaccine News

November 16, 2020

Most markets advanced last week on news that Pfizer’s vaccine candidate was greater than 90% effective in preventing covid-19. Despite an ominous rise in covid-19 cases last week, investors chose to focus on the great news out of Pfizer along with optimism for a similar outcome for Moderna’s vaccine candidate. Investors rotated out of high-flying technology names and into economically-sensitive names as evidenced by the last week’s results for the Russell 1000 – the growth index was negative by 1.27% while the value index shot up 5.69%.

For the week, the DJIA advanced 4.19% while the S&P 500 gained 2.16%. The tech-heavy Nasdaq lost 0.55%. Developed international markets moved nicely higher as investors added to beaten-down international stocks. For the week, the MSCI EAFE index gained 3.89% while emerging market equities (MSCI EM) jumped 1.03%. Small company stocks, represented by the Russell 2000, finished ahead by 6.13% for the week. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week slightly lower as the index closed lower by 0.14%. As a result, the 10 YR US Treasury closed at a yield of 0.89% (up ~6 bps from the previous week’s closing yield of ~0.83%). Gold prices closed at $1,885.70/oz – down 3.31% on the week. Oil prices jumped $2.99 (or 8.1%) last week as investors bet that an economic recovery will lead to increased demand for oil.

Economic news released last week was mixed. On Thursday the U.S. Bureau of Labor Statistics (BLS) announced that the Consumer Price Index (CPI) was unchanged in October, missing expectations for a 0.1% advance. The CPI advanced 1.2% year-over-year. Also on Thursday the Department of Labor reported that initial jobless claims for the week ending November 7 were 709,000, better than expectations of 740,000. On Friday the BLS reported that the Producer Price Index (PPI) gained 0.3% in October, ahead of expectations for a 0.2% advance. The PPI advanced 0.5% year-over-year. Neither the CPI nor PPI point to unreasonable or out of control inflation, and this gives the Fed more time to remain accommodating. Economic news in the week ahead will focus on retail sales, industrial production, housing starts and existing home sales.

We suggest investors stay close to their long-term target asset allocations with a slight defensive bias. Stay Safe!

“Perseverance is not a long race; it is many short races one after the other.” – Walter Elliot