From the Desk of the PM: Elation and Reality… Breaking Down the Vaccine News and Market Reaction

Yesterday saw stocks surge on the Pfizer vaccine story. Yet there remain some cold, hard facts.

Fireside Charts
Americans Face Eviction, Equities Hit New Highs While Dividends Get Slashed, and the Fed Thinks Long Term

Americans Face Eviction, Equities Hit New Highs While Dividends Get Slashed, and the Fed Thinks Long Term

Happy early Thanksgiving Fireside Charts readers! While we’re grateful for our families, our jobs, and our homes this Thanksgiving, we’re reminded that many are not so lucky—particularly in 2020—and are facing struggles that are likely to worsen in the coming months. A wave of foreclosures and evictions is approaching, many are being pushed out of the workforce, and small businesses are wading further into debt to stay afloat. And the market may have hit new highs recently—the Dow crossed the 30,000 milestone for the first time ever yesterday—sending sentiment soaring, but dividend suspensions and decreases have also spiked this year, surpassing 2008 levels. Could we be due for a pullback? The Fed meanwhile has focused much of its attention on purchasing longer-term treasuries this year, but how will inflation come into play? Finally, the manufacturing sector looks to be holding up well both here and abroad, and growth is accelerating here in the U.S. Will the trend continue into the winter?

Commentary
VIDEO: BCM’s 3Q20 Quarterly Market Update Call with the PM

VIDEO: BCM’s 3Q20 Quarterly Market Update Call with the PM

The third quarter certainly felt a bit calmer in relation to the wild market rides experienced in Q1 and Q2, but important developments remained—a new inflation policy from the Fed, sky-high political tension, and equities' first negative month since March to name a few. What does it all mean for investors as we head into Q4? Click below to hear BCM Lead Portfolio Manager Dave Haviland provide a review of the third quarter and what you should be keeping an eye on as we move forward:

Commentary
BCM 3Q20 Market Commentary: Damn the Pandemic! Batten Down the Economy and Full Steam Ahead!

BCM 3Q20 Market Commentary: Damn the Pandemic! Batten Down the Economy and Full Steam Ahead!

The S&P 500® Index’s 8.5% third-quarter gain was a welcome response to the first half of the year’s histrionics. The quarter had its own volatility as the markets flirted with a 10% correction, but then resolutely continued climbing the proverbial wall of worry. Ultimately, the trends that were in place at the beginning of the quarter continued and little changed.

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Fireside Charts
Manufacturing Weakens, New Index Highs, and Is a Rotation to Value Stocks Finally Gaining Traction?

Manufacturing Weakens, New Index Highs, and Is a Rotation to Value Stocks Finally Gaining Traction?

Manufacturing has slumped in the Empire State, underperforming expectations and coming in at 6.3 as businesses increasingly feel the weight of surging Covid cases. The Dow and the S&P 500® Index both hit new all-time highs on the Moderna vaccine news, and stocks favored by retail investors also saw a significant bump—could equally emotional reactions drive future volatility as vaccine developments and record case counts battle for column inches? Value sectors like Energy and Financials also climbed on the news in what could be a long-anticipated rotation away from growth stocks. The USD meanwhile has continued to weaken as the Yuan climbs—could it help the U.S. narrow the trade gap with China?

Fireside Charts
S&P Hits New Highs as Covid Cases Spike, The Recovery Slows, and Yields Climb

S&P Hits New Highs as Covid Cases Spike, The Recovery Slows, and Yields Climb

The S&P 500® Index closed at a record high on Friday as optimism on vaccine progress—which we heard more good news on this morning—battled a dramatic and accelerating spike in Covid cases. That spike is making its presence felt in the larger economic recovery though, where momentum has slowed. Small caps and the energy sector both enjoyed a boost themselves last week in what could become an interesting reversal of established trends. Meanwhile, yields have continued to rise as the Fed’s balance sheet soars to new heights… will that climb be complicated by the ongoing push-pull between spiking Covid cases and progress toward a vaccine?

Fireside Charts
Sector Vaccine Sensitivity, the CPI Fell to 0.0 in October, and the Impacts of Massive Bond Issuance

Sector Vaccine Sensitivity, the CPI Fell to 0.0 in October, and the Impacts of Massive Bond Issuance

Spiking Covid cases have undercut some of the market optimism following the announcement of Pfizer’s vaccine progress on Monday, but the market reaction offers some interesting insight into the “vaccine sensitivity” of various sectors—something we’ll be keeping an eye on as trials continue and results flow in. Meanwhile, the recent flood of new bond issuance could make its presence felt everywhere from CPI—which remains subdued at a reading of 0.0—to the growing spread between growth and value stocks. The U.S. hit a record October deficit of over $284 billion; will the bond market become even more crowded in an attempt to address it with new debt?