Hold the Presses!!! (just after 7 am EST)
Pfizer just announced a vaccine that is 90% effective!
Is this the beginning of the end, after we experienced the “end of the beginning” earlier? It just might be. In the words of Pfizer CEO:
“Great day for science and for humanity.”
To say this is a game-changer may be to understate substantially. We will obviously have to see how this rolls out (including final safety assessment) and how quickly the economy can fully open up. But we can already see that equities, which were up earlier, are up a lot more. The Dow jumped over 1500 points!
As the Dow and S&P 500 soared higher, the tech-heavy NASDAQ index fell (although still up from Friday’s close). Value indices jumped, especially small cap. If the world shifts back to “normal” we will have less need for many of the new technologies, and we may well see recovery in the battered sectors of the equity market that have suffered so much. Maybe “Big Tech” prices look a little too high for a post-vaccine world.
Monday Morning (written at 6 am EST)
Events are moving quickly, so as we write and review articles, we find they require updates before we can send them. I suppose we could just start tweeting, but our Compliance Officer would not approve! So, below is what we wrote Friday as the markets closed, and rather than edit that, we wanted to send it for its “moment in time” feel, with a quick update.
This morning equity markets around the world are up sharply again, reinforcing the message from last week. Mr. Market expects divided government, resulting in few dramatic changes that could be disruptive. In fact, many of the prognosticators are seeing this as very good for international markets, especially emerging markets. And related to that, we are seeing a weakening dollar. Kind of a “risk on” scenario for emerging equities and even fixed income. Fewer trade disputes, perhaps a lessening of tension with China. More of a “business as usual” feel to it.
To be clear, all this could change, and quickly. We have not started believing in market forecasts and will not be recommending any portfolio shifts based on the opinions of the talking heads on the business channels. But it is useful to get a sense of what the broad market makes of all this. Markets certainly provide better information than our regular sources.
We entered 2020 knowing it was to be an election year, and fully expected things would be contentious politically and also somewhat challenging for the markets. But now, as we take stock in the immediate aftermath of a still undecided election, we look back on a year of big issues, the election just being the most recent. We don’t need to list all the troubles–we lived through them.
We also ought to acknowledge that some excellent things happened this year. For one thing, the way we were able to respond to being shut down and transitioning to many millions of people working from home was remarkable. The use of new technologies and techniques for communicating changed the world, in many ways permanently and largely for the better.
We also saw three countries in the Middle East establish relations with Israel, essentially “making peace.” That sort of sailed under the radar, but it is a big deal. More to follow.
This year saw the equity markets react to the pandemic and the shutdowns with the fastest bear market in a very long time, starting in late February and ending in March. That was immediately followed by a stunning recovery. The recovery continued through the third quarter, as you can readily see in the Q3 report, with the S&P 500 up almost 9% for the quarter and over 5% for the year. Amazing.
As all this happened, we saw the companies collectively identified as “Big Tech” soar in market value, with several passing the $1 trillion mark and Apple passing $2 trillion! Meanwhile value companies, such as industrials, financials and energy, languished. An enormous gap developed between traditional companies who suffered and the “Big Tech” giants who benefitted from the pandemic.
Since the end of the quarter, we saw stocks declining sharply until this week. As we went into the election, suddenly the proverbial “animal spirits” seemed to take hold of the equity markets, and they were off to the races. Even as election chaos ensued and the pandemic seemed to worsen by the day, stocks soared. Of course, we are back to “Big Tech” leading the way, which we discussed in our recent letter.
I watched the market close Friday, essentially flat for the day but the best week for equities in seven months. And so, after all this, we are looking at portfolios back into positive territory for the year.
 Kevin Stankiewicz, “Pfizer CEO calls Covid vaccine a ‘great day for humanity’ and a ‘light at the end of the tunnel’”, CNBC, November 9, 2020.
 David Goldman and Anneken Tappe, “Dow soars more than 1,000 points after Pfizer announces great news about its vaccine and Joe Biden declared victorious”, CNN, November 9, 2020.
 Source: Google Finance accessed November 9, 2020
 Source: Morningstar Direct, data as of 11/9/2020
 Carmen Reinicke, “Apple hits $2 trillion market cap, becomes first US-listed company to reach milestone (AAPL)”, Business Insider, August 19, 2020.
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