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Week of November 2, 2020 Thumbnail

Week of November 2, 2020

Greetings,

We hope this note finds you and your family doing well and staying safe. Here is a look at this week's highlights:

 

  • The Economy Is Recovering:  Third quarter GDP came in at slightly over 33%, with the actual number for the quarter not being the annualized 33% number,  but instead a 7.4% growth rate.   A really solid number that suggests that the fourth quarter should be getting off to a great start, with auto sales actually up 24% over the quarterly average in Q3 and retail sales up about 5% over the Q3 historical average.  Yet, the economy is still 3% smaller than Q3 2019 and when you take into account that we should have experienced 3% growth since 2019, our deficit in economic growth is actually over 6%.  This represents the real structural damage that will take much longer to correct.
  • Investing Based On Politics.  If you go back to 1949--Truman's second term-- and invested $10,000 in the S&P 500 Index and held it to today, you would have roughly $2.2 million.  If you invested that same $10,000 only when democrats held the white house, you would have $296,000,  and if you invested and held only during republican terms you would have accumulated $75,000.  There are too many variables to make any decision based on any one party winning the election, including of course policy changes put in place by any one incumbent party that may have subsequently benefited the incoming party to the White House.  You simply cannot come to any conclusions based on these numbers as to what party is better for the markets.  Point being, if you are investing solely based on politics, you will likely be wrong.
  • Buy the rumor, sell the news:  Last week's drop in equity markets marked the worst weekly drop in stocks since April.  Election uncertainty, rising virus levels, and a stalemate in stimulus talks all contributed to the volatiilty.  As a forward looking mechanism, the markets will look back on last week's GDP number as history and look forward to the these aforementioned concerns and just how they will translate into growth and policy in 2021 and beyond.

Our recap of last week's events is linked below.  As always, please do not hesitate to contact us on any questions you might have.


Market Insights - October 28, 2020

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