US stocks had one of their best months ever, soaring to new record highs on better than expected COVID-19 vaccine news and a relatively clear outcome from the 2020 elections. Results came back on vaccines from Pfizer, Moderna, and AstraZeneca all posting better than a 90% effective rate, well surpassing hopes. Emergency approval and distribution is set to begin in December. The results were a relief considering COVID-19 cases are hitting new hospitalization records. With nearly all S&P 500 companies reporting third quarter earnings 84% have posted a positive earnings per share surprise, which would tie the mark for the highest percentage of companies posting an earnings surprise. The US economy continued to show growth with recent data. Hiring numbers in October well surpassed expectations with 638,000 jobs added and the unemployment rate falling to 6.9% from 7.9%. However, new unemployment claims have plateaued over recent weeks after seeing significant declines earlier in the year. Factory activity expanded in October posting the sixth straight month of growth and business activity reached its highest level in more than five years. Retail sales disappointed, rising 0.3%, less than September and the five day shopping period including Black Friday and Cyber Monday was down significantly from 2019. The housing market continues to be a strength of the economy with median home prices reaching a new record high and sales at the highest level in over a decade.
Foreign stocks surged in November on the positive vaccine news and central bank support. The eurozone Purchasing Managers Index picked up pace in October and hit a 27-month high. The Bank of England announced another round of bond purchases as they stated they expect the UK’s economy to shrink in the fourth quarter. The Bank of Australia cut its benchmark lending rate to near zero and announced its own bond buying program. The ECB said it plans to increase its support for the eurozone in December with a support package that could include billions more in bond purchases, cheaper bank loans, and an interest rate cut. Asia-Pacific countries reached a trade deal including China, Japan, South Korea, Australia, and 11 others that cover roughly a third of global economic output. The deal facilities investment between the countries and reduces tariffs. Developed markets topped emerging markets over the month, but emerging markets have led the way over the year to date.
Bonds posted solid gains over the month driven by a drop in interest rates. The Fed’s November meeting concluded with no changes in policy. They still said the coronavirus posed significant risks to the US economy, recommending additional fiscal stimulus, and they maintained their existing monetary stimulus measures. However, later in the month, Treasury Secretary Mnuchin announced he would let several of the Fed’s emergency lending facilities expire at the end of the year, despite the Fed’s objections. The 10-year Treasury yield declined to end the month at 0.84%, down from 0.88% to begin November. Over the month, credit bonds were the top performer, while over the year, credit and government bonds were relatively in line. Over November and the year to date, longer term maturities have outpaced shorter term maturities.
|Index Performance||Nov.||YTD||Trl. 1 Yr.|
|US Stocks (Russell 3000)||12.17%||15.68%||19.02%|
|Foreign Stocks (FTSE AW ex US)||13.49%||5.71%||10.31%|
|US Bond Mkt. (BBgBarc Int. Gov/Cred)||0.50%||6.22%||6.35%|
|Municipal Bonds (BBgBarc 1-10 Yr Muni)||0.68%||3.61%||3.91%|
|Cash (ICE BofA ML 3-Mo T-Bill)||0.01%||0.66%||0.80%|
There is no guarantee that any investment strategy, including those described here, will be successful. Any investment or investment strategy can lose money. Past performance does not guarantee or predict future results. You should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Raffa Wealth Management, LLC. This information was gathered from reliable sources but we cannot guarantee accuracy. Indexes do not reflect the fees associated with actual investments and such fees would reduce the performance illustrated. Source: Morningstar, Inc.