We hope this note finds you and your family doing well. Here is a look at this week's highlights:
This morning equity futures are pointing to another strong market open on news of Pfizer's vaccine efficacy and the possibility of an emergency rollout. Republican control of the Senate and more gridlock in Congress was viewed favorably by the markets last week. The odds of a corporate tax increase under the Biden administration have declined considerably. Estimates of the impact of a tax increase on corporate earnings were in the range of 15% of S&P 500 profits. Last week the markets reacted positively to these lower odds.
Yet even with the news of Pfizer's vaccine success, we are reminded that the virus continues to rage and any vaccine would not be widely distributed until the summer and fall. We would not be at all surprised to again see news around the pandemic dominating market headlines as we move away from election news and enter what looks to be a difficult next few months as virus cases continue to spike.
Earnings continued to roll in last week, where we heard from companies that cover everything from billboard advertising to high tech 5g rollout. On all fronts earnings looked solid, with the economic recovery continuing across the country.
Last week's unemployment rate of 6.9% is significant, especially to the largest banks that were building loan reserves based on a worst case scenario of a year-end unemployment rate in excess of 10%. Could it mean these lenders will be pulling these reserves back onto their income statements in the first and second quarters of 2021? Very possibly, and very positive for financial stocks if this trend in the labor numbers continues. Fiscal stimulus will likely be key to holding this trend.
A brief recap of last week's events is linked below.
As always please do not hesitate to contact us on any questions or concerns. Due to the current COVID restrictions our holiday party is regrettably cancelled for this year. We look forward to seeing all of you next year and celebrating the end to what has been a very difficult and challenging year.