Nov. 9-13, 2020

What happened last week

Markets outpaced the pandemic’s second wave

With markets already on pace to extend the previous week’s gains, Monday’s news from Pfizer Inc. – suggesting its experimental COVID-19 vaccine was 90% effective in preventing infections – advanced markets into record territory. But the upward momentum didn’t last as rising infection rates, record numbers of hospitalizations and renewed business restrictions brought investors back down to earth mid-week, before bouncing back on Friday.

News of the vaccine breakthrough clashed with reports of rising infections

Monday’s unexpected announcement from German pharmaceutical giant Pfizer Inc. and its partner BioNTech SE lifted markets around the world. At the benchmark level, both the Dow Jones Industrial Average and the S&P 500 hit intraday highs. The Dow closed at 29,158 (up 2.95% on the day), its first record high since February, before the initial COVID-19 lockdown. The S&P 500 closed at 3,550.66 (up 1.17%), its first foray into record-territory since September. Canada’s S&P/TSX Composite also scored its highest daily gain since mid-October.

The Nasdaq was the only North American benchmark to close in negative territory Monday, highlighting the market rotation many investors expect when a vaccine becomes publicly available. Stay-at-home stocks from companies like Amazon, Netflix, Zoom and Peloton, which have risen during the pandemic, all fell through the day. On the other hand, airlines, cruise lines and other travel-related stocks went up. Oil prices, which have seen historic declines throughout the pandemic, also rose 7.78% on Monday, the highest daily increase since May.

Vaccine optimism, which is likely to continue as competing drug makers begin to report their findings, provided plenty of enthusiasm for the future. But with the U.S. hitting 10 million cases on the same day Pfizer made their announcement, the immediate reality became too large to ignore as the week continued. Markets were mixed through Tuesday and Wednesday as excitement gave way to more practical concerns about deploying a vaccine, and New York and California imposed new COVID-related business restrictions. Seventeen states throughout the U.S. also reported record numbers of hospitalizations. On Thursday, with average daily cases in the U.S. up 69% from just two weeks ago, all four major North American indexes slid into the closing bell, though, by Friday, markets rebounded and finished strong, with the Dow and S&P 500 back in record territory.

Joe Biden was elected 46th President of the United States

News that Joe Biden had won the presidential election also factored into positive gains early in the week. Despite some concern from corporate America about a Biden victory and the affect on financial markets, as it became clear he had secured the necessary electoral college votes required to win the election, markets reacted positively, no longer bound to the uncertainty around who would lead the U.S. economy for the next four years. Biden has pledged to make the pandemic a top priority and has already announced his COVID-19 task force. Outgoing President Donald Trump continued to dispute the election results, taking legal action in several states.


The stock and bond market*
INDEX CLOSE WEEK YTD
S&P/TSX Composite 16,675.64 2.41% -2.27%
Dow Jones Industrial Avg. 29,479.81 4.08% 3.30%
S&P 500 Index 3,585.15 2.16% 10.97%
NASDAQ Composite 11,899.29 -0.55% 31.84%
10-yr GoC Yield 0.73% 0.09% -0.97%
10-yr U.S. Treasury Yield 0.89% 0.06% -1.03%
WTI Crude Oil (US$/bbl) 40.12 8.02% -34.29%
Canadian Dollar US$0.7606 -0.82% -1.21%
Bank of Canada Prime Rate 2.45%

*Weekly performance ending November 13, 2020. Sources: www.bloomberg.com, www.bankofcanada.ca and www.treasury.gov.


What’s ahead

Canadian economic data:New reports on Canadian manufacturing sales and retail sales are expected this week, along with another look at the annual inflation rate.

Circle these dates

  • Nov. 26: U.S. Thanksgiving (U.S. markets closed)
  • Dec. 9: Bank of Canada interest-rate announcement
  • Dec. 15-16: U.S. Federal Reserve meetings and statement

Key take-away

Take the emotion out of it. As we learned – with markets hitting their lowest point in March, only to bounce back through the summer, far quicker than expected – volatility is a normal part of investing. Reacting emotionally? Trying to time the market? We don’t recommend these investment strategies.


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