This was a week that we have all been waiting for and much of what we expected came to pass. We ended up with what looks like will be a contested election after Joe Biden was deemed the official winner of the election over the weekend. The last time we had a situation like this, lawsuits and recounts lasted right up until the deadline for the Electoral College to certify the results in mid-December and that looks likely this time as well. From Election Day 2000 through the year end, the market went down 7.8%[1].
In spite of the contested nature of the election, the market had its best week since April and volatility measures came down significantly. There was a lot of other data last week that didn’t seem to have a major impact on the markets. Most of the economic data was relatively positive looking backwards. However, it may be a challenge to see continued growth if the US states follow Europe into further lockdowns over the winter.
Find all of this plus more on the importance of finding a risk tolerance that matches with your comfortability in this weeks @KonvergentWP Market Update Blog.
Here are the top three things we’re covering this week’s blog:
The Market
The S&P was up 6.67% on the week. Most of the gains came early in the week as investors began to gain clarity over the outcome of the election. Amidst the turmoil surrounding the election COVID continues to surge in many states across the nation. Near the end of the week, House Speaker Pelosi and Senate Majority Leader Mitch McConnell hinted that stimulus negotiations may be once again on the table. All these headlines combined to send the market higher, but near-term volatility continues to be a concern.
Economic Data
New claims were virtually flat last week and came in at 751,000. This could be an initial sign that the jobs recovery is beginning to slow. Pandemic unemployment claims increased by roughly the amount new claims lost, bringing the overall weekly total of new claims to just over 1.1 million.
Continuing claims came in at 7.285 million. This represented a drop of nearly 500,000 and the seventh straight week of falling claims. While this is certainly a positive sign, continuing claims remain over 5.5 million higher than at this time last year.
Total Claims for Unemployment from all programs came in at 21.5 million. The main catalysts behind this reading was a 992,000 drop in pandemic unemployment assistance and the continued fall in regular state claims. Pandemic emergency claims – the relief program for regular unemployment – saw an increase of over 275,000.
Lost in all the election drama was the Octobers jobs report. Nonfarm payrolls came in better than expected at 638,000. This was slightly lower than the previous month but still represented a positive surprise. If COVID cases continue to rise[2] and the pandemic is prolonged into the spring, we could see the jobs recovery begin to halt as many parents are forced out of the work force in order to care for their children.
More good news came in the form of the unemployment rate, which decreased to 6.9%. This reading beat expectations of 7.7% and equates to a drop of one percent over the previous month. However, as COVID begins to spread across the nation, the likelihood of a total shutdown continues to increase. The economic outcome of such an event would more than likely be similar to March and result in a spike in unemployment claims.
Catalysts for Volatility Ahead
After months of ruthless campaigning, the election has finally come and past. While the outcome of the Presidential race has yet to be confirmed, the market jumped on hopes that some clarity was brought to the picture.
One of the most common investment myths is that the market performs better under one political party than with the other. History proves otherwise and the market generally rises over time regardless of who is in the White House. However, specific policies matter from an individual planning perspective.
With that said, this election is being contested in ways not seen since 2000. While Joe Biden appears locked in the lead, President Trump will surely do everything he can to challenge the outcome of the election[3]. At the same time, COVID cases are currently surging in the U.S. and across the globe. Even if the election drama begins to fade, COVID could bring additional volatility to the market in the weeks ahead.
On the other hand, Congress appears to be renewing the negotiations over a second stimulus package. Both Senate Majority Leader Mitch McConnell and House Speaker Nancy Pelosi made statements late last week that suggested stimulus is a top priority. If a deal were to be reached the outcome would likely be bullish for the market. Nonetheless, key differences remain between the two leaders that could prevent any deal from being reached before 2021.
What does this all mean? Well, volatility is normal in even the healthiest of markets. However, it is important to know how much volatility you are comfortable withholding while also maintaining a suitable market return. Click here you want more information on finding a risk level that matches with your standards.
Articles of Interest
Election Day Winners – While the overall market benefited from gaining election clarity, several companies received a larger bump when voters approved decreased regulation in their respective industry. Check out this article for insight into the impact made by voters in some states on the Cannabis, Online Gambling, and Rideshare industries.
COVID Around the Globe – As the COVID – 19 pandemic continues to surge in the U.S., countries across the world are facing similar dilemmas. Check out this article for a status update on how world leaders are handling the virus.
Stimulus Negotiations Resume – With the election now in the rearview window, leaders in Congress are looking to carry on with negotiating another stimulus package. Prior to the election, statements made by both sides indicated that there has been some progress made since talks first began. Check out this article for the latest updates on where the deal stands after the promising jobs report on Friday.
Social Media Post of the Week
After months of hard work and dedication, we are proud to announce that our very own Max Graber has obtained his CRPC designation. Since joining the team in May of this year, Max has become an integral member of our client service team!
Don’t forget to follow us on your favorite Social Media Feeds!!
Non-Financial Story of the Week
While everyone around the country was focused on the Presidential election, my daughter was focused on learning more about the entire electoral process in her 4th grade class. They had multiple assignments to understand how our elections work and to dive into the issues that they care about individually. The culmination was an opportunity to choose a project to reflect this and Lyla chose to do a video promoting how she would run the country. Max was working overtime last week studying and passing the CRPC exam while also helping Lyla by editing this video for her as well! Check out the video here.
Bottom Line
The past two weeks have truly exemplified the election volatility we have been expecting. With the possibility for intense legal battles ahead, volatility is likely to remain in the market. During this time, it is critical to ensure that your portfolio risk tolerance matches that of your own.
If you have any questions about any of the information in this week’s blog or what you should be doing right now with your personal and business planning, do not hesitate to reach out to us by sending an email to info@konvergentwealth.com or calling us at 253-236-7000.
[1]https://www.cnbc.com/2020/10/26/contested-election-what-went-down-in-markets-during-bush-gore-battle.html
[2] https://www.cbsnews.com/news/covid-case-record-united-states-121k/
[3] https://www.msn.com/en-us/news/politics/biden-overtakes-trump-in-pennsylvania-has-slim-lead-in-georgia/ar-BB1aKqIl?ocid=uxbndlbing