It’s been a while since I shared thoughts about investing during a pandemic. As expected, the market has been swinging up and down this year, leaving not much to say other than the usual, “stay the course.”
Most recently, it seems to have reacted to greater clarity in politics and the pandemic alike by delivering more promising returns. What, if anything, does this mean to your investments? To see, let’s unpack these insights further.
First, there’s the mixed-bag election results. The presidency and House are blue, and the Senate appears to be red (50 Republicans, 48 Democrats, two Georgia runoffs in January).
Apparently, markets preferred this to the possibility of a blue wave. Regardless of your political preferences, a blue sweep would likely have meant more taxes and regulations. Markets would probably have assumed that meant slower economic expansion, and translated that into lower market returns.
Not to be cynical, but a mixed government means neither party can do everything it wants. The week of the election, the S&P 500 seemed to “approve” by delivering its best election-week return since 1932.
Now, to the Coronavirus. On November 9, Pfizer and partners announced spectacular 90% effective results for the vaccine they’ve been developing. Moderna then followed up with 95% efficacy on their own promising vaccine. Our nation’s leading infectious disease expert Dr. Anthony Fauci has suggested we could have wide access to a vaccine as early as April 2021, and perhaps relative normalcy by July. (He’s also endorsing ongoing public health measures as part of the solution.)
Tech stocks, which have thrived on social distancing, dropped 1% the day Pfizer announced its news. But stocks of companies pummeled by the pandemic typically surged (travel, live entertainment, energy companies, etc.). So did stocks of small value companies, which increased 8% that day.
A rotation from high- to low-priced stocks could continue in 2021 as the vaccine allows us to resume more normal lives. Then again, hopes may yet be dashed … or delivered even faster. Who knows? To play my broken record one more time, the best course is to choose an investment mix that makes sense for your own financial goals, and to stay the course with that.
To read my past articles please visit insights.alliantwealth.com and select the InsideNoVa library.