Much Can Change Quickly

November 2, 2020

It feels odd writing this commentary one day ahead of the National election knowing so much can change so quickly depending upon a multitude of factors. As I was reading this morning several countries in Europe are preparing for full scale lockdowns due to the resurgence of COVID cases in Europe. Certain nations, such as Germany and Belgium have already re-instituted severe restrictions, Spain has closed its borders, and the U.K. and Italy are both slated to impose lockdowns that are less intense than previously experienced but, nonetheless, indicative that a full return to business-as-usual may still be a long way off. 

Many small business owners in large swing states here in the US are boarding up their businesses in anticipation of riots. Will there be a clear winner in this election, or will this be a contested election with the outcome unknown for quite some time?  

By October 30, with 64% of the S&P 500 reporting actual results, 86% reported positive EPS (Earnings Per Share) with 81% reporting higher than expected revenue.2 With several high profile companies still due to report earnings, if this percentage of positive EPS reports holds it will be the highest rate since 2008, when data source FactSet first began tracking this information.

However, investors did not reward earnings beats in October. 

As we’ve noted, September and October are typically poor months for U.S. stocks during election years.  That is precisely how it has played out this year as well.  Following a weak September, it appeared stocks might buck that trend during the first half of October, but October closed with a thud.  The S&P 500 fell 4.1% in the final week of October which was enough to move the index into negative returns for the month.  In fact all three major US indices including the S&P 500, the Dow Jones Industrial Average, and the NASDAQ all finished in the red for the month of October. 

In our opinion, October really wasn’t a good month for any asset class except Bitcoin. Gold was negative for the month as well.  One of the biggest losers was European stocks and Germany’s DAX fell more than 9%.

To add a bit of perspective, despite a bullish August for U.S. stocks, the S&P and the DOW are basically flat for the last three months as of October 31, 2020 with the S&P 500 total return index up just 0.37% and the Dow up just 0.80% on a total return basis. It seems that much of the investor’s angst in October appeared to do with the failure of a stimulus package being passed on Capitol Hill, and the uncertainty surrounding COVID in addition to election uncertainty.


Financial Markets do not like uncertainty, and as we enter election week there is plenty of that.  We must wait and see how all of this plays out over the coming weeks.  During times like this we believe it is important to have the ability to remain nimble with a tactical approach to the markets or to have an absolute return process as part of your overall allocation.  Much can change quickly in the investing environment we are in.


Entering the month of October our faster moving technical measures were signaling for a moderate allocation.  By the end of the month those faster moving technical indicators signaled a higher risk environment and a conservative allocation. Our longer-term technical measures, which are designed to identify longer term trends within the market remain positive at this time.

Brad Thompson
Chief Investment Officer

Published November 1, 2020; Accessed November 2, 2020

Published October 30, 2020; Accessed November 2, 2020

The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange.

The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market and it is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies.

The DAX (Deutscher Aktienindex) is a blue-chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange.

There are certain limitations to technical analysis research, such as the calculation results being impacted by changes in security price during periods of market volatility. Technical measurements are one of many indicators that may be used to analyze market data for investing purposes and should not be considered a guaranteed prediction of market activity.

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