Market Update: Nov 12 2020
- Tech Stocks
- Presidential Election
- Market Expectations
Here is a recap of our live Q&A session held on 11/12/20 presented by Joe Randazzo JD, CFP® from FNA Wealth Management and Dave Stone CPA, CFP® from Tartan Wealth Management.
Details for our next session, 11/19/20, can be found here. Please note the time change to 4:00 pm.
What sectors of the market do you expect to lead the market moving forward?
- As we have discussed since March, technology and growth stocks have led the market over value-oriented and other areas of the market. We believe that tech is due for a pullback and we should see other areas lead the market in the coming weeks.
- We believe that the following sectors may replace technology as the market leaders:
- Value-oriented stocks – Financials and energy stocks typically do well during the 90 days leading up to an election.
- International stocks – International stocks have been underwhelming over the last couple of years relative to US stocks. We think this could change as there are many countries who have not seen the severity of the economic distress that the US has and recovery will be potentially be easier and faster. A weak US dollar can be a good backdrop for investing internationally.
What has driven the stock market since the election and what are the expectations for next 12 months?
The market has rallied since the election with tech leading last week and value stocks leading this week.
- It appears the market is relieved that there will not be a prolonged election and it is unlikely that Trump can overturn the results in the swing states he lost. This should provide more certainty in what to expect in the next 12 months and longer.
- It appears that the Republicans will maintain majority in the Senate. This will make it more difficult and unlikely that many of the tax increases will be enacted with a split Congress. This should benefit corporate earnings and thus the stock market.
- The market expects Biden to be a centrist on China trade thus lowering potential volatility.
- The recent news on a potential vaccine may be the game changer that we have been discussing. An effective vaccine may bring the economy back much faster and help drive the market higher.
- We expect a rotation from growth stocks to value, small cap, and international stocks.
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. 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.
Growth investments focus on stocks of companies whose earnings/profitability are accelerating in the short term or have grown consistently over the long term. Such investments may provide minimal dividends which could otherwise cushion stock prices in a market decline. Stock value may rise and fall significantly based, in part, on investors’ perceptions of the company, rather than on fundamental analysis of the stocks. Value investments focus on stocks of income-producing companies whose price is low relative to one or more valuation factors, such as earnings or book value. Such investments are subject to risks that their intrinsic values may never be realized by the market, or such stock may turn out not to have been undervalued. Investors should carefully consider the additional risks involved in both growth and value investments.
International investing involves special risks, including, but not limited to, the possibility of substantial volatility due to currency fluctuation and political uncertainties.
Small cap stocks may be subject to a higher degree of risk than more established companies’ securities. The illiquidity of the small-cap market may adversely affect the value of these investments so those shares, when redeemed, may be worth more or less than their original cost.