Robare and Jones Weekly Market Commentary 11/18/2020

ROBARE AND JONES ON THE MARKETS

Vaccine can be a powerful word. It’s worth 14 points in Scrabble (42 on a triple word square) and, last week, it was worth a whole lot more than that to financial markets.

On Monday, Pfizer (PFE) and BioNTech (BNTX) announced preliminary trials of their vaccine show it may be 90 percent effective. The revelation conjured tantalizing visions of a future in which virus precautions are unnecessary and life returns to normal.

From this news the energy sector had the largest percentage increase of the week, up 16%, followed by an 8.3% increase in financials. Other strong gainers included industrials, up 5.3%, and real estate, up 5.2%. This resulted in a 3% jump for the down while the Nasdaq which is tech heavy fell 1.5%

As demand for risk assets, like stocks, increased so did bond yields. In the United States, the yield on 10-year Treasuries rose to 0.97 percent. Rising long-term interest rates caused analysts to speculate about the possibility of inflation and stagflation (rising prices during a period of weak economic growth), reported Barron’s.

Mid-week, enthusiasm moderated. While investors remained confident a vaccine could lead to economic recovery over the longer term, concerns about the shorter-term took center stage. Markets retreated a bit as investors mulled:

Weaker-than-expected consumer sentiment. In November, consumer sentiment has declined by 5.9 percent month-to-month and it was off by more than 20 percent year-to-year. Sentiment is an important measure because consumer spending is a major driver of U.S. economic growth. When sentiment declines, people may spend less.

A surge in coronavirus cases. The number of daily cases has increased by more than 70 percent nationwide since the beginning of November. Eighteen states are at risk of reaching full hospital capacity, reported NPR.

New pandemic restrictions. As holidays approach, many cities and states introduced or re-introduced restrictions intended to slow the spread of the virus. The measures could slow economic recovery.

Market volatility is likely to persist. Stay calm and don’t let short-term events jar you from your long-term financial goals.