Fade to This Rally? | November 13, 2020

AUTHOR: Kerry J. Hilsabeck, CFP®
TITLE:    Investment Adviser Rep
TAGS:     Jobs, Inflation, Yield Curve, S&P 500, Consumer Sentiment

Rally, rally, rally, markets continue to climb. Is this trend likely to continue or are there signs of a coming fade?


Markets started the week on a strong continuation of last week’s growth. The S&P 500 rose 1.17% and was as high as 3% intraday. Most of the growth happened on the back of Pfizer announcing a 90% efficacy in its coronavirus vaccine. This was indicative of the softness in stay at home equities and strength in stocks that do well under a standard economic recovery.


Job openings rose to 6.436M in September, an 84K increase from the previous month. Market rose on Tuesday by almost 2%. Quite a follow up to a strong open to the week on Monday. Pfizer’s announcement has spurred a rotation from growth assets towards value assets in the short-term. Any shocks in the progress towards a post-COVID environment could push this back in the other direction.


The economic calendar was light on Wednesday. This did not stop the markets from climbing on Wednesday as the early week rally continued. The S&P500 advanced an additional 2%. The rotation to value stalled Wednesday, however, as the Nasdaq took the lead. Likely a buy the dip scenario.


Initial weekly jobless claims have fallen to 709K moving further away from the highs from earlier in the year. This is encouraging as we see cases increase across the country. Additionally, crude oil inventories rose when a decline was expected. Markets continued the march higher as the S&P 500 rose nearly 2% again. Leadership still remained with the Nasdaq, however.


Michigan Consumer Sentiment fell flat on Friday, as expectation came in at 77.0 rather than the 82.0 expected. This sets the actual sentiment to outperform strongly coming in a very important shopping month for Americans. Markets ended the week flat, taking a breather from the strong rally across the week.


The S&P 500 rose 9.64% for the week! As the week wore on, we continued to expect to see markets soften after the strong start to November. It was especially expected as COVID ramped up and the risks of fresh lock downs increased. Those expectations never came to fruition. A flat Friday indicated markets were not too concerned about heading into the weekend news cycle long the market. There is little sign beyond COVID cases that this current rally is likely to fade soon. Focus may return to stimulus risks in the near term, however, which still remains an outlying risk.

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