What a difference a week makes! Our previous update spoke to the pessimism and fear that was dominating the market and driving down returns. The story last week was one of optimism and hope. The markets started the week with strong returns driven by the hope of decisive election results. Despite waiting until the weekend for those election results, that momentum grew throughout the week as it became clear that a divided government – where the Presidency, House of Representatives and Senate are split between the Democrats and Republicans – was increasingly likely. (Historically markets have performed best under a divided government.)
By Thursday the major markets closed with cumulative gains over 7%. Friday markets took a breather and ended the day mostly unchanged, capping off one of the best weeks this calendar year.
Several positive economic stories may have gotten lost in last week’s news cycle. They include a positive jobs report where 638,000 new jobs were added in the month of October and a continued drop in the jobless rate, now at 6.9%.
Looking forward, COVID remains the greatest threat to our economy. Last Thursday marked a grim new statistic: the highest ever daily total of new cases was reported at 121,888. Twenty seven states hit their new record highs on Thursday and the seven day average grew by 24% from the previous 7-day period.
We do remain optimistic that as the election wraps up we will see politicians getting back to work on a COVID relief package and a unified strategy to combat the disease. We take heart in the resiliency of both the American people and our economy.