On this episode of the Wiser Wealth Roundtable podcast, the team discusses how the coronavirus vaccine development and the election have driven the market results seen in November.
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November has been a great month for the markets. The NASDAQ is up YTD 32%, the Dow Jones is up 4% and S&P 500 is up 12%. Why? The market has moved long past the pandemic and there is a disconnect between the way we are living our lives and how the market is performing. The market has experienced a huge and fast turnaround. Behavior finance is such an important topic to consider. Many people reacted to the market lows and left the market in the spring. Unfortunately, those people are not enjoying the rebound we are experiencing now. In addition to a strong market, gross domestic product or GDP is also better than many anticipated. It seems as though the markets have responded to the election and vaccine developments.
There is a lot of rhetoric still in the news, but Biden has won the presidency and the markets have accepted this win. There are still two Senate races left to decide here in Georgia. The outcome of these Senate races will determine if there will be a majority Republican or Democratic government. If Republicans take the Senate, we will have a Democratic President, majority Democratic House and majority Republican Senate. In terms of the market, this combination has historically yielded favorable stock market performance. Gridlock in Washington is good, as it forces compromise.
In mid-November, Pfizer and Moderna both announced coronavirus vaccines that were highly effective in trials. What does this mean for the economy? This means that many sectors of the economy can begin to open up again. Sectors like travel, tourism, real estate, restaurants and many more face-to-face business that drives the economy can restart. This creates a ripple effect in the economy that helps drive many other sectors. Congress will now need to consider if a second stimulus is really needed. The Fed chair, Jay Powell, is a proponent of additional stimulus and not overly concerned about the excess debt. His point is that we need to get money into the hands of the people who truly need a stimulus. Some action needs to be taken for those industries that have been decimated by the pandemic. How bifurcated will the new economy be? There may be some aspects of the old economy that do not come back after the pandemic. We know that technology has really taken off during the pandemic and is likely to be a continued growth area.
The most important lesson learned through this year’s highs and lows is to stay in the market and have a long-term strategy with your investment decisions. 2020 has been a great reminder to stick with your financial plan, stay the course, keep investing and don’t panic.
Learn more about Brad Lyons.
Learn more about Matthews Barnett.