November 5 Weekly Market Update

While the final days of October were no doubt challenging for investors, stocks staged a comeback this week. Much of this week’s resurgence seemed to be based on the fact that this bruising election season may be nearing an end. Nearing, however, is the key word as there was not a clear victor in the presidential race on Election Day. The final tallies from multiple key states were unknown as Election Day came to a close and may not be fully known until the end of the week.

This electoral uncertainty did lead to some intra-market volatility midweek. Coming into the week, many pollsters were predicting a blue wave, with Democrats winning the presidency as well as both houses of Congress. Those predictions appear to be incorrect, as it is looking likely that the Republicans will maintain their majority in the Senate. With the potential for gridlock, investors began to back away from some cyclical areas like basic materials and bank stocks under the belief that any forthcoming fiscal stimulus may be moderated. Conversely, technology stocks surged under the hopes that recent antitrust rhetoric may tone down.

Looking away from the election, the Institute for Supply Management announced that manufacturing activity grew in October. This was the sixth consecutive month of growth, reaching levels not seen since late 2018. Notable growth was seen in many industries, including apparel, food and beverage, and furniture. While end consumer demand many not be back to pre-pandemic levels, this is a sign that the economy at large appears to show ongoing directional improvement.

Like 2016, the polls were significantly off again in 2020. Joe Biden came into this week with an eight- to ten-point lead and the expectation was for the Democrats to take the Senate. Instead, it appears we will have a razor close presidential election and Republicans holding onto the Senate. How could the polls be so wrong – again? It may be that voting is a personal choice that many individuals like to keep to themselves. For those who deem it personal in this way, they may choose to not participate in polls at all. As such, a significant portion of the populace may be left out, skewing results. Though they have some predictive power, polls are not elections and making specific investment bets on potential election outcomes is often a risky proposition.

Stay safe and be well.

Market comments based on the S&P 500, Dow Jones Industrial Average and NASDAQ Composite indexes which are unmanaged and cannot be directly invested into.

Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time and cannot be guaranteed.

Past performance is no guarantee of future results. Investing involves risk and the potential to lose principal.