by William Henderson, Vice President / Head of Investments
As we move closer to year end, our four major uncertainties continue to drag on and on without an end in sight before the Presidential Election. Polls keep pointing to a clear Joe Biden win, but we saw the same polling data pointing to a Hillary win in 2016 which leaves us very skeptical of polls. Each time a vaccine for COVID-19 moves closer to release, cases spike as they have around the world this week with many countries including France, Italy and the UK showing very large one-day and one-week increases in virus outbreaks. Last week wrapped up testimonies for Amy Coney Barret and it looks as though a full vote in the U.S. Senate is possible this week. With the SCOTUS drama behind us, Washington can revisit the stimulus package that Treasury Secretary Steven Mnuchin and House Speaker Nancey Pelosi have been playing volleyball with lately. Thankfully, the hearings for the SCOTUS appointment have been congenial when compared to previous hearings and this has put a nice damper on related protests and social unrest. We continue to see positive earnings releases and clear EPS beats versus Wall Street estimates. That tells us the recession is behind us and most analyst underestimated the pace at which U.S. companies will recover from the recession in the 1st and 2nd quarter. Further, company balance sheets remain healthy and borrowing rates and levels remain very favorable for Investment Grade and High Yield borrowers.

Unfortunately, the increase in COVID-19 infections could prompt government authorities to usher in new curbs on openings for such venues as bars, restaurants, and movie theatres.   The consumer remains key for a healthy and robust recovery. Online shopping, working from home, and virtual conferences/meetings continue to be the norm for everyday life around the world.  Last week’s Amazon Prime Day(s) was reported to set a new record for sales; but the online retailer was hesitant to release actual numbers. One number released was the $3.5 billion in sales for third-party sellers on Prime Day. This really shows the extended power of Amazon and how it helps small businesses around the country. The third-party business of Amazon is fueled by its dominant cloud services provider: Amazon Web Services (AWS).  

The FED remains on the sidelines with its full offering of weapons to fuel the economy and add critical liquidity to the markets. This one constant variable in a world of unknowns certainly adds a needed level of stability, which is clearly pushing the markets higher year-to-date. As of October 15, 2020, the Dow Jones Industrial Average was flat at -0.16%, but the S&P 500 Index was up +7.8% and the NASDAQ was up +30.6% for the same period; reminding us of the importance of diversification and exposure across the broader markets.