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Strategic Insights

Volume 9, Edition 38 | November 16 - November 20, 2020

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Backing a Winner

Doug_Walters Doug Walters | Articles

Read Time: 3:00 min

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As we head into Thanksgiving week, it is not the holiday that most had envisioned a year ago. Yet, with the stock market in positive territory despite a global pandemic, there is much for which investors should be thankful.

Contributed by Doug Walters , Max Berkovich , Aleksey Marchenko

Stocks were essentially flat this week as investors grapple with the opposing forces of spiking COVID cases/deaths with continued good news on the vaccine front. Worrying about which of these sides will win investors’ attention in the near-term is an exercise in futility. In the long-run, we know the winner, and that is something for which to be thankful.

I have often referred in the past to these opposing market forces as in a tug-of-war. Yet, it occurs to me what we have here is much more of a pushing match. When one side pulls hard enough in a tug-of-war, a line is crossed, and the other team comes tumbling down. Game over. In this case, we have more of a pushing match with a large playing field. COVID cases are spiking, and the human tragedy is likely to worsen before it gets better. We do not know if stocks will react negatively to this, but they could. However, we know with a fair degree of certainty that a 95% effective vaccine will successfully stamp out the virus at some point. So, given enough time, this pushing match will be won by the vaccine. Investors know this.

The newsflow in the coming weeks and months will be challenging to digest as COVID continues to spread. Long-term investors need to stick to a simple gameplan:

  • Avoid market timing out of fear. This is a proven losing strategy.
  • Maintain a diversified portfolio built to weather any market storms.
  • Institute a rebalancing process designed to capture opportunities that market volatility presents.

Investors can be thankful that the stock market has thus far navigated the pandemic well. We at Strategic are thankful for our clients and wish you and your loved ones a happy and safe Thanksgiving holiday!

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Headlines This Week

Vaccine 

  • Pfizer announced that they are planning to file for emergency use authorization with the Food and Drug Administration (FDA) for their COVID vaccine.
  • The company reported the vaccine to be 95% effective, well above the FDA’s 50% vaccine effectiveness target.  
  • Moderna is right behind Pfizer with plans to file with the FDA. The company also claims their vaccine is about 95% effective.
  • Moderna’s vaccine can be stored at the same temperature as many other vaccines, while Pfizer’s vaccine must be stored at minus 94 degrees Fahrenheit, making their vaccine more difficult to distribute.

Coronavirus 

  • NYC has instituted some new restrictions, including closing schools, as the 3% positivity rate was triggered.  
  • NY is still doing relatively well. Statewide, their positivity rate is 2.9%, which is the fourth-best in the country.  
  • Only five states are below the WHO’s 5% target positivity rate. Many Midwest states see positivity skyrocket (Wyoming 54%, South Dakota 53%, Iowa 48%, Idaho 41%, Kansas 32%). According to the WHO, positivity must be maintained below 5% for an extended period to stem the virus’s spread.

Stimulus 

  • On Friday, Treasury Secretary Mnuchin said that he would work with Democrats to draft a targeted stimulus package.  
  • Rising COVID cases and previous unemployment benefits running out at the end of the year may pressure lawmakers to negotiate some relief.
  • Good news on a new fiscal stimulus bill will likely be good news for investors.

The Week Ahead

Being Thankful

Thursday is Thanksgiving, and U.S. markets are closed.

  • According to The American Farm Bureau, a 16-Pound Turkey is 7% cheaper than last year, and the price of the whole thanksgiving dinner is hitting a 10-year low.
  • Happy Thanksgiving!

Super Wednesday

  • Another look at the 3rd quarter Gross Domestic Product, Personal Consumption Expenditure Index (PCE), and the Federal Reserve’s meeting minutes are the big ones next week.
  • New Home Sales, Durable Goods, Personal Spending, University of Michigan Consumer Sentiment Index, and weekly unemployment reports are other economic releases on the docket.

About Strategic

Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on client assets over $1.3 billion.

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