It’s said markets hate uncertainty, but that wasn’t the case last week.
Despite tremendous uncertainty about the outcome of the United States election, major domestic and international stock indices moved higher and the CBOE Volatility Index, better known as Wall Street’s fear gauge, moved 35 percent lower.1 Ben Levisohn of Barron’s reported:2
“By all accounts, it should have been a terrible week for the stock market. At the close of trading on Friday, we still didn’t know whether Joe Biden or Donald Trump had won or which party would control the Senate. There was also set to be at least two recounts – one in Georgia, and one in Michigan – with likely more to come. It’s the kind of uncertainty that the market is supposed to hate.”
Yet, there was little fear to be found in financial markets. Investors’ confidence may have been grounded in a wave of positive economic news:
- 15 of 18 manufacturing industries grew in October. The ISM’s Manufacturing Purchasing Manager’s Index rose 3.9 percent in October. The Index finished at 59.3 percent, an indication manufacturing is improving and the economy is growing.3
- Rates remained low. The Federal Reserve kept rates near zero, which supports economic growth. The Fed’s Open Market Committee statement indicated supportive monetary policy would continue. “The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.”4
- People are going back to work. More jobs were created in October than economists expected. The Bureau of Labor Statistic’s Unemployment report showed 638,000 new jobs for October. The U-3 unemployment rate fell to 6.9 percent. That’s an improvement on April’s unemployment level of 14.7 percent.5
While that’s all good news, the number of coronavirus cases in the United States continued to increase last week. Randall Forsyth of Barron’s reported, “As politics at long last fades as a factor, the renewed surge in COVID-19 cases looms large…Even without renewed mandated lockdowns, however, people are apt to hunker down voluntarily…that could dampen the labor market’s recovery.”6
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* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
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2 https://www.barrons.com/articles/the-stock-market-soared-last-week-why-the-election-didn-t-matter-51604714996?refsec=the-trader (or go to https://resources.carsongroup.com/hubfs/Carson%20Coaching%20Online/Market%20Commentary/Weekly/2020/11/11-09-20_Barrons-The_Stock_Market_Doesnt_Care_Who_the_President_Is-Footnote_2.pdf)
6 https://www.barrons.com/articles/the-likely-power-split-in-washington-suits-investors-just-fine-51604714095?mod=hp_DAY_Theme_2_1 (or go to https://resources.carsongroup.com/hubfs/Carson%20Coaching%20Online/Market%20Commentary/Weekly/2020/11/11-09-20_Barrons-The_Likely_Power_Split_in_Washington_Suits_Investors_Just_Fine-Footnote_6.pdf)