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Market Commentary for the week ending November 6th, 2020


  • Stock markets around the world surged both before and after Tuesday’s election.
  • Much of the post-election rally mimicked performance we have seen throughout the year
  • The U.S. employment picture shows continued signs of improvement.


The Election's Winners and Losers

Markets around the world surged higher both before and after Tuesday’s election leaving the market averages in every country meaningfully higher than the week before. Part of this could be explained by stocks simply bouncing back from a rough week before when stocks everywhere took a sharp dive but, regardless, investors clearly have reacted positively to the outcome of the election.

During the three days following the election, the S&P 500 rallied 4.2% but not all stocks participated. There were actually 185 of the 500 stocks in the S&P, more than a third of the total, that declined during these three days. Furthermore, much of what we saw was very much a continuation of the performance behavior we have seen all year. Scroll through the below charts for a summary.

3 Days Post Election

Interesting Numbers


More than 80% of the 500 companies in the S&P 500 have now reported earnings for the most recent quarter with results consistently topping Wall Street’s estimates. The median Earnings Surprise, or difference between analysts’ forecasts and actual results, has been +13.2% for the quarter. The accompanying graph shows how much better this quarter and last have been compared to previous quarters driven by companies outperforming lowered expectations due to COVID. Click here for a detailed list of all companies reporting.

Median earnings surprise

Source: www.YCharts.com


In June, at that point well into the pandemic, the Federal Reserve forecast that the unemployment rate would end 2020 at 9.3%. At the end of October, as highlighted in more detail below, the unemployment rate has already fallen to 6.9% and is expected to continue is decline. Clearly the economy and jobs market have improved much more so than the Fed expected reminding us of the difficulty of forecasting.

This Week’s Performance Highlights

Market Indexes week ending November 6, 2020

Source: www.YCharts.com

  • Large U.S. stocks, as measured by the S&P 500, gained +7.2% for the week while the tech-heavy NASDAQ Composite outperformed with a +9.0% rally. The Dow Jones Industrials Average was a close third up +6.9%. In spite of the big gain, the S&P 500 is still -2.0% below its September 2nd high.
  • Small U.S. stocks posted a big gain for the week as well up +6.9%. Year-to-date it is down by just -0.1%.
  • International stocks had a great week as well with developed countries averaging a gain of +7.9%. The best performing developed market was the Eurozone led by Italy and France up +11.9% and +9.5% respectively. Eurozone markets are still lower year-to-date by -5.5%.
  • Emerging markets climbed +7.2% with two of the year’s worst performers, Brazil and Russia, turning in the best performance for the week surging +14.5% and +10.6% respectively.
  • The alternative asset classes moved higher as well but lagged behind the broader market indexes. Commodities were up +2.5%, gold gained +4.0%, and real estate stocks climbed +3.6%. Commodities and real estate stocks remain sharply lower for the year while gold is up over +28%.
  • Bonds also saw prices move higher by +0.7% with yields declining.

Economic Indicators

The October employment report showed continued signs of improvement but the pace of jobs gains appears to be slowing. The economy added 638,000 for the month, meaningfully better than economists’ estimates of 530,000 but a bit of a slowdown from the previous month’s 672,000, pushing the unemployment rate down to 6.9%. Severely impacting the report was a loss of 268,000 government jobs of which 147,000 were the elimination of temporary jobs related to the 2020 U.S. Census.

Job gained/lost

Source: https://www.bls.gov/news.release/empsit.nr0.htm

As the graph shows, the Private Sector added 906,000 jobs with some of the hardest hit areas of the economy, including bars and restaurants, hotels, and retails, reporting the biggest gains. This growth was actually better than the month before when the Private Sector added 892,000. The government job losses were clearly the drag on this report.

Looking forward, there is concern that hiring will slow due to the increased number of COVID-19 cases. Furthermore, there is still much more healing to be done as the total number of employed people in the U.S. remains down by about 10 million since the start of the pandemic.

In a separate report, initial jobless claims for the week came in a bit higher than forecast at 751,000 but down slightly from the week before. The total number of people collecting unemployment benefits continues to drop now at 21.51 million compared to 22.66 the week before.

The Institute for Supply Management (ISM) reported both its manufacturing index and, separately, its services index for October. Both show the economy continuing to grow with the manufacturing index coming in with a reading of 59.3% (anything above 50 indicates growth). This was not only better than estimates but well ahead of the prior month’s 55.4% suggesting the improvements are accelerating with many reporting business is almost back to normal levels.

The ISM Service Index came in at 56.6% suggesting industries such as hotels and food service continue to recover. Although this was also a strong report it did show a bit a deceleration from the prior month.

Upcoming Economic Reports

  • Jobless Claims
  • Consumer Price Index
  • Producer Price Index
  • Consumer Sentiment Index

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