by William Henderson, Vice President / Head of Investments
Is it really possible that we are taking out two unknowns in one week? Joe Biden wins the Presidency and Pfizer announces a COVID-19 vaccine that is 90% effective in trials. Wow! We are left with the recession and its recovery and social unrest as our remaining unknown events in 2020. Last week, we saw impressive returns in the markets with all three major indices trading up on the week. The Dow Jones Industrial Average gained +6.9%, the S&P 500 Index gained +7.3% and the NASDAQ gained +9.0%; putting their year-to-date returns respectively at: -0.75%, +8.6%, and +32.6%; proving once again that patience, long-term horizons and a sound financial plan are important.

Looking forward, we will most likely have a divided government and a strengthening economy as our tailwinds for the close of 2020 and even into 2021. Add to that a vaccine for COVID-19 that is 90% effective in clinical trials, continued monetary and potential fiscal stimulus and you see why the markets are rallying so strongly already this week.  Last week, Federal Reserve policymakers met on Wednesday and Thursday but announced no changes in monetary policy. In fact, the Fed’s post-meeting statement noted that the COVID-19 pandemic continues to meaningfully weigh on economic growth. Fed Chair Jerome Powell stated that the central bank still has monetary tools it can deploy to stimulate the economy, if needed. That said, the economy continued to add jobs at a better-than-expected pace with 638,000 new jobs added in October 2020; driving down the unemployment rate to 6.9% vs. 7.9% in September. The Fed was basing their statements and outlook on last week’s data and last week’s more or less global spike in COVID-19 cases.

  This week, Pfizer announced promising news about a potential vaccine for COVD-19. The market is seeing beyond the unknowns and is perhaps more efficient than investors realize. Although the presidential race is all but decided, a divided government remains a distinct possibility. The amount and timing of additional fiscal stimulus is still uncertain, what remains a certainty is the Fed keeping interest rates at near zero and with more arrows in their policy quiver.