Many Stocks Rise Sharply Higher
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.
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