Many stocks rose sharply higher Monday after news that the COVID-19 vaccine being developed by Pfizer and German partner BioNTech is more than 90% effective.
As we shared last week, once the election is over and the outcome is determined - regardless of which party wins - the uncertainty surrounding the election will be eliminated and markets may be inclined to move higher. That is exactly what we just experienced. Futures were already up for Monday before the vaccination news was announced. With the presidential election behind us, we are hopeful that we can continue battling COVID-19, healing our economy and bridging our divides as a society.
Our next President will inherit an economy that is improving nicely. Based on gross domestic product, the US economy grew by a record 33% annualized in the third quarter (Bureau of Economic Analysis), likely bringing one of the shortest ever US recessions to an end.
The strength of the US consumer has been a key driver of this recovery, with retail sales already eclipsing their pre-pandemic highs. Additionally, manufacturing activity has been on the upswing. Investments in technology equipment has surged and most housing markets across the country are booming. Company results during third quarter earnings season have been much better than expected.
Turning to policy, negotiating a stimulus package to help fortify the economic bridge to a COVID-19 vaccine will likely be among the first priorities after inauguration day, although a smaller package in the lame duck session of Congress may be possible.
Meanwhile, COVID-19 remains a threat as cases and hospitalizations continue to rise. Although the numbers may go higher in the short run, treatments have improved significantly and have been greatly improving patient outcomes. While widespread shutdowns are unlikely, renewed restrictions in Europe in response to its latest outbreak is a reminder that this battle is not yet over.
While political changes may cause market volatility, the US political and economic systems are resilient and can adapt. Most of our investment time horizons extend far beyond this election and any political cycle.
If you have questions or would like to discuss your own financial planning or investment strategy needs, we welcome you to Contact Us to set up time to discuss further.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
This research material has been prepared by LPL Financial LLC. All index data from FactSet. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.