When it comes to the year 2020, one thing we can all agree on is that it has been a year like no other. We had the Covid-19 pandemic take hold in March in the US and with it over 250,000 deaths and record unemployment. We had global market uncertainty and unresolved trade war talks between the US and China, and a tumultuous presidential election. The world and its citizens have been through a lot this year.
As of this writing we are now more certain who our next President will be, and two run-off elections on January 5th in Georgia will determine who will hold majority in the Senate. Should the Republicans maintain a Senate majority and Democrats win a House majority, this would provide checks and balances for new Biden administration laws which Wall Street would like. Should the Democrats achieve a majority in both houses, this could cause the stock market to pause and perhaps retract as there would be concerns of Congress voting to increase corporate taxes which Wall Street wouldn’t like.
One of the first priorities on our next President’s agenda should be to get a second stimulus package out to the American people. This will allow families and small businesses to pay their bills and hopefully buy some time until the US economy can start the recovery process.
The economic recovery process won’t truly begin until there is a vaccine. Pfizer recently announced their Covid-19 vaccine is 95% effective and Moderna’s vaccine has shown a 100% effective rate during their stage 3 trials. Both have submitted applications to the FDA for emergency use authorization of their Covid-19 vaccine candidates, providing optimism that a vaccine could be available to the public as early as next spring. This will allow people to feel more comfortable going out and dining at restaurants, going back to the movie theater and resuming their travel plans. This should then lead to businesses ramping up their hiring and thus a decrease in unemployment, which will provide a tailwind to the US economy.
As for the US stock market, as measured by the S&P 500 Index, it hit its bottom back on March 23rd when it was -34% year to date. Since then the stock market has climbed all the way back and as of November 27th was +14.52% year to date (total returns). Over the last 30 years November and December have ranked as the 1st and 3rd best months in terms of returns for the stock market. This may or may not come to fruition in 2020 but the stock market has shown its resiliency. As we head into 2021 with less uncertainty, the US stock market will welcome that and should continue its upward trend.
Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. All indices are unmanaged and investors cannot invest directly into an index.