Market Update: Nov 05 2020
- Potential Upcoming Risks
- Presidential Election
Here is a recap of our live Q&A session held on 11/05/20 presented by Joe Randazzo JD, CFP® from FNA Wealth Management and Dave Stone CPA, CFP® from Tartan Wealth Management.
Details for our next session, 11/12/20, can be found here.
What are the major risks we should look out for in the next 12 months?
With the election mostly behind us (although results are still uncertain at the time of this writing), there are still many reasons to be cautious over the next year, not the least of which is the current valuation of the markets. That said some specific issues we’re watching closely and would advise caution around are:
- Corporate earnings not living up to expectations – as suggested earlier, we believe corporate earnings have posted as strongly as they have largely because of the CARES Act, stimulus checks that were sent out in the Spring, and the promise of another stimulus package being passed. We’ve said it before on this call, and we’ll say it again – we firmly believe the market has priced in near-perfection with corporate earnings. As COVID cases continue to rise, holiday gatherings begin, and economies remain open, we believe fund will likely be diverted from the ”stay-at-home-stocks” that have carried the indexes so far.
- Tightening on fiscal policy ($600 checks ran out in July, and still waiting to see what happens next).
- COVID infection trend – Among other things, kids going back to school after the holidays, flu season, and the timeline of the vaccine each play an important role in how this virus plays out. We’re watching closely for a leveling off of reported cases as each of these run their course.
I would have expected the market to fall under pressure without election results. Why did we see the market open higher on Wednesday morning?
As we’ve suggested before, investors were as tuned into Congressional races as they were the Presidential election. It seems as though the House and Senate will be split again and Wall Street may very well view that as good news, good enough to move forward without waiting for a definitive Presidential election outcome. A Republican Senate would suggest no tax increases any time soon, so no reason to sell our stocks just yet.
The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Capital Analysts or Lincoln Investment. The material presented is provided for informational purposes only. Nothing contained herein should be construed as a recommendation to buy or sell any securities. As with all investments, past performance is no guarantee of future results. No person or system can predict the market. All investments are subject to risk, including the risk of principal loss.