Markets “In a Nutshell” for November 10, 2020
Investment Week at a Glance
Stocks finished up for the week. The Dow Jones Industrial Average was up 6.87%, the S&P 500 rose 7.32%, the New York Stock Exchange Composite (2,000 stocks) rose 6.35% and the average investors index (Value Line Index) was up 6.64%. Foreign stocks (DJ Global ex U.S.) were up 7.45%. Bond prices were higher for the week, with the 10-year U.S. Treasury ending the week 5 basis points lower at 0.83%. (Data source: Wall Street Journal)
Stocks Soar Despite Uncertainty
Despite all the ingredients needed for a widely predicted market selloff, most importantly a deeply contested election that lasted multiple days, markets soared on the prospects for a divided government that would likely not be able to increase taxes to the proposed rates that the candidate Biden was proposing, but may be able to spend more through stimulus deal if a compromise can be reached. The “blue wave”, where Democrats would have had complete control of the Presidency, House and Senate that many political pundits predicted, did not happen and may have contributed to the rise in stocks given the risks of uncertainty of what policies would have passed were that scenario have come to fruition. While much still must be sorted out regarding this election, enough clarity was given for markets to be able to finally have some certainty that the most extreme risks have so far been avoided and that the economy will continue to recover. (Barron’s)
Unemployment Continues to Fall
Hidden, or more realistically ignored, in last week’s wave of political news was the jobs report for the month of October and it continued to show progress in providing more jobs for workers. The report showed that the U.S. gained 638,000 jobs in the past month and that the unemployment rate fell to a much better than expected 6.9%. What was even more encouraging was that the participation rate for working age citizens rose, meaning that more people are beginning to actively look for jobs. While the report was generally well received, it still is a deceleration of the number of jobs being gained, which is widely expected to continue for the rest of the recovery. What will be increasingly important will be another percentage that calculates the number of unemployed workers plus the number of discouraged workers, which still remains above 9% of the labor force. This figure was the biggest problem coming out of the Financial Crisis in 2008-09 and will be indicative of how quickly the U.S. can get back to a growing economy. (Barron’s)
How many of the 10 sectors in the S&P Dow Jones indices were negative for the week of the election?
Have a Great Week!