(916) 797-7370 JE.Legacy@gmail.com

Weekly Market Commentary 11/13/2020

-Darren Leavitt, CFA

Financial markets rallied to all-time highs on news that Pfizer and BioNTech have a 90% effective Covid-19 vaccine.  The news induced a robust rotation trade out of Mega-cap Technology shares into value-oriented cyclicals.  Financials, energy, and industrial sectors lead the way while information technology and consumer discretionary shares lagged.  The S&P 500 gained 2.2%, the Dow rose 4.1%, the Russell 2000 increased 6.1%, and the NASDAQ fell 0.6%.  US Treasuries sold off with the 2-year note yield rising one basis point to close at 0.17% and the 10-year bond yield adding seven basis points to close at 0.89%.  Gold lost just over 3% or $65.40 to close at $1886.80, an OZ, while oil increased 8% to close at $40.12 a barrel.  There were no changes to our models during the week.

The trading week was all about receding concerns regarding the election and optimism surrounding a vaccine for Covid-19.  Election results continued to favor President-Elect Biden while the Trump campaign continued to pursue legal actions to dispute the election.  Congressional results continued to show a divided house.  Republicans picked up some seats in the lower house, but Democrats continue to hold a majority.  In the Senate, it appears Republicans will maintain the majority. Still, two contested seats in Georgia will go to a run-off on January 5th, which has the potential to change the balance.  Biden continued to build his transition team with an initial focus on creating a Covid-19 task force.

On Monday, pharmaceutical companies Pfizer and BioNTech announced they had a Covid-19 vaccine that is 90% effective.  The news spurred a massive rotation trade out of “stay at home” themed stocks into beaten-down cyclicals.  Airline stocks and other travel-related companies traded higher on the news while the technology and consumer discretionary sectors sold off.  It is expected that additional vaccine efforts will show similar successes.  Moderna and Oxford AstraZeneca could announce the results of their trials in the coming weeks.  The positive news on the vaccine front comes as infection rates continue to show dramatic increases worldwide.  In the US, daily infection rates have surpassed 180k, which has urged some states to increase lockdown mandates.  The lockdowns will likely have an economic impact, while congress continues to be at an impasse in providing another tranche of stimulus.  Federal Reserve President Jerome Powell last week warned that the next few months could be difficult for the economy.  Markets will likely continue to be volatile in the coming weeks as short-term setbacks related to regional lockdowns are balanced with the positive prospects of an effective vaccine or vaccines.

The information in this Market Commentary is for general informational and educational purposes only. Unless otherwise stated, all information and opinion contained in these materials were produced by Foundations Investment Advisers, LLC (“FIA”) and other publicly available sources believed to be accurate and reliable.  No representations are made by FIA or its affiliates as to the informational accuracy or completeness.  All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation. No party, including but not limited to, FIA and its affiliates, assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.

The views and opinions expressed are those of the authors do not necessarily reflect the official policy or position of FIA or its affiliates.  Information presented is believed to be current, but may change at any time and without notice.  It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. You should consult with a professional advisor before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.