Vaccines, Strong Retail Sales, and Stimulus

December 2, 2020

November was a very good month for stocks across the globe as equity investors showed an increased appetite for risk following the lackluster months of September and October. The Dow Jones Industrial Average Index gained more than 12% during the month representing the best month for the Dow since January 1987.The NASDAQ also ended the month up almost 12% and the S&P 500 Total Return Index gained almost 11%. It was the Russell 2000 small cap index, however, that led U.S. stocks during the month with a gain in excess of 18%.  Internationally, the developed country index, MSCI EAFE, was up 15.5% and the MSCI Emerging Markets Index was up over 9%.

Pharmaceutical firms Pfizer and Moderna reported highly effective test results for their COVID vaccines during the month.  Moderna has requested clearance for its vaccine, and Pfizer is already shipping out its treatment, the first of which arrived in Chicago on November 27th.2 Forward looking investors likely anticipate an improved economic outlook once a vaccine is widely available.  It appears the market is encouraged by a renewed focus on a cure and domestic economic growth instead of being averted by concerning statistics regarding record virus cases and hospitalization rates.

Holiday sales are already booming, just not inside stores.  Adobe Analytics, a firm that tracks online sales, reports online sales have surpassed previous records every day since Thanksgiving and this year’s “Cyber Monday” pulled in a whopping 10.8 Billion in online sales. This not only represents a 15.1% increase over last year but also holds the record for most U.S. online sales in a single day.3 The Federal Reserve recognized the excess savings rate for households during its November meeting of the Federal Open Market Committee (FOMC). This reserve of household funds is estimated to be $1.2 to $1.4 trillion.  This may have helped investors feel more comfortable with the retail sales outlook for the Holiday season. Additionally, there has been a V- shaped recovery in wages and salaries, which are approaching nearing their pre-pandemic levels. The combined positive news of early robust retail sales, a large savings cushion, and improving wage and salary data seems to have given investors more confidence.

The FED staff assessed that this savings cushion, and the enthusiasm with which it appears being spent, would be enough to allow consumption numbers to remain elevated. This spending is expected to offset the belt-tightening and budget-mindedness—and thus lowered consumer spending-- currently experienced by a number of households.4

The market also seems to like President-elect Biden’s choice of former Fed Chair Janet Yellen to serve as Treasury Secretary. Many feel this may lead to further stimulus. The marquee headline stories for  November shifted quickly from COVID-19 vaccines, to the Trump administration permitting the start of the presidential transition (albeit while continuing to challenge election results and not conceding), to Biden beginning to announce his cabinet and advisors. 

The names on Biden’s list were familiar. The market’s forward-looking reaction to the prospect of a return to “the known” and, perhaps, a “more traditional” set of leaders (and therefore a more predictable course) was positive. This mood, combined with the expectation of a mixed government (the Senate is expected to remain in Republican hands post the Jan. 5, 2020 run-off election) pushed the market higher.   


December is usually a good month for stocks as Holiday spending ramps up.  Will we get the typical Santa Clause rally this year?  Some Wall Street firms feel the November rally may be an “overshoot”, while others are optimistic.   We know much can change quickly in the environment we are in so we remain cautiously optimistic.


As we entered November our longer term technical model, which is designed to identify longer term trends within the market had remained positive.  The positive price action throughput the month leading up to the election was enough to move our shorter term technical model into positive territory.  As we head into December, both technical models are signaling a strong equity environment.

Brad Thompson
Chief Investment Officer

Published November 30,2020; Accessed December 1, 2020

Published November 28,2020; Accessed December 1, 2020

Published December 1, 2020; Accessed December 1, 2020

Meeting conducted November 4-5, 2020; Minutes accessed December 1, 2020

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 S&P 500® Total Return Index is an unmanaged index of 500 common stocks chosen for market size, liquidity and industry group representation. It is a market-value weighted index. As a total return index it assumes reinvestment of all cash distributions.

The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.

The MSCI EAFE Index (Europe, Australasia, Far East) is an unmanaged free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.

The MSCI Emerging Markets Index consists of 23 economies including Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and the United Arab Emirates. The MSCI is a float-adjusted market capitalization index.

The Federal Open Market Committee (FOMC) is a committee of the Federal Reserve Board that meets regularly to set monetary policy, including the interest rates that are charged to banks.

V-shaped recovery is a type of economic recession and recovery that resembles a "V" shape in charting. It involves a sharp rise back to a previous peak after a sharp decline in these metrics.

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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