Another Peak in the “Mountain”

Another Peak in the “Mountain”

The stock market’s performance in November created another peak in the “mountain” contour traced by the market over the last three months. After a brief respite in late October, stocks rallied before, during, and immediately after the U.S. elections. The week after the election, investors were greeted by the news that a COVID-19 vaccine candidate demonstrated strong evidence of efficacy. This set off a short-term and breathtaking rotation in stock market leadership. While this positive vaccine news pushed the overall U.S. market higher, technology stocks fell by about 4%, while the energy sector rose by an eye-popping 14%. This theme played out across the market. Companies perceived to benefit from COVID-19, such as Zoom and Peloton, suffered sharp reversals. Meanwhile, stocks of companies negatively impacted by the virus, such as Delta Air Lines and Cinemark, logged substantial gains.

Outside of the stock market, other asset classes have exhibited interesting behaviors. Some of them show that speculative fever is still with us. After experiencing profound drops in 2018, Bitcoin, for example, has approached its all-time high with a surge of 40%. Some very new electric vehicle companies are now valued in the tens of billions without ever selling a single vehicle. Gold, on the other hand, continues to slide from its all-time high set in August, ending the month over $100 lower per ounce. While there are many ways to interpret a price change in gold, this drop coincides with elections unfolding without violence and a subsequent drop in U.S. political uncertainty. And while the Dow crossed 30,000 for the first time, the bond markets seem to suggest a more tempered enthusiasm. The yield on the bellwether ten-year U.S. Treasury note decreased slightly during November, ending at 0.84%. This yield hardly indicates a swift economic recovery.

While we cheer the performance of the market in November, it would surprise us to see volatility disappear any time soon. Even if we have a vaccine approved before the end of the year, there is still the matter of production, distribution, and administration. In the U.S., only 48% of the adult population received a flu vaccine last season. To achieve herd inoculation against COVID-19, a substantially higher percentage of the population would need to receive the COVID vaccine. While we are optimistic this will ultimately happen, there is plenty of uncertainty around the details. We advise clients to maintain discipline, disregard the short-term noise, and stay focused on long-term plans.

With the holiday season upon us, we are extra thankful this year for our team, our clients, and our families. We wish you and your loved ones a warm and safe December. Stay well, and please reach out if we can be of service.

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