The While November historically is a middle-of-the-road month for the stock market—experiencing average gains of 0.8% since 1928—this year could prove to be especially turbulent. Another wave of Covid-19, the presidential election and a wave of key data promises a rollercoaster of a month for markets. U.S. stock markets closed lower on Friday, reversing gains from the previous day as COVID-19 cases continued to mount across the United States and Europe Moving Golden Tate, Kevin Zeitler still appears to be possible
November 2020 Market Outlook: Election + Pandemic = Volatility
The U.S. stock market lost ground for a second straight month in October. The S&P 500 tumbled 3.5% on the month, which ended with its worst week since March. Long gone is the red-hot rally that followed the late winter bear market, and professional investors caution there could be more turbulence ahead in November.
There’s a grab-bag of reasons to blame for the slowdown. A second wave (or third wave, depending on who’s counting) of Covid-19 is sweeping the U.S. and setting new daily records for infections, there’s the contentious presidential election, several heavyweight tech names have reported disappointing quarterly earnings, and Congress failed to pass a second stimulus package before the election.
While November historically is a middle-of-the-road month for the stock market—experiencing average gains of 0.8% since 1928, according to Yardeni Research—this year could prove to be especially turbulent.
“November is going to be a tough month volatility-wise,” says Brad McMillan, chief investment officer at the Commonwealth Financial Network. While there’s “a tremendous amount of uncertainty” right now that will weigh on the market in the near-term, McMillan says there’s reason to be optimistic about stocks longer term.
Here’s what to watch in the month ahead.
Election Day arrives on Tuesday, November 3, but thanks to the popularity of mail-in ballots thanks to the pandemic, we may not know who won the presidential race until days later. That’s because states have differing cut-off dates for when they’ll count absentee or mail-in ballots—even as late as November 23, in the case of Washington.
The likely delay in results is hardly a surprise to anyone who’s been following the presidential race. In fact, 68% of Americans expect that they will have to wait the results—although most think a clear winner will emerge within a matter of days, according to an NBC News|SurveyMonkey Weekly Tracking Poll released on October 25.
A drawn out election outcome also won’t come as a surprise to Wall Street. “We’re seeing the market do what it’s doing lately because people are building up insurance against indecision and unrest,” says Barry James, the owner and portfolio manager of James Investment Research. Still, all of the debate about whether President Donald Trump or former Vice President Joe Biden will be better for the market overstates their influence on the economy, he adds.
“Regardless of who wins, the market tends to go up,” James says, citing analysis by Ned Davis Research that show stocks have experienced annual gains historically under both Democrat and Republican presidents. “Yes, we’ll have some near-term turmoil potentially, but in the end, the election won’t be the thing that drives the market.”
In this case, that’s because no matter who wins control of the White House—and even if there’s a delay in determining the outcome—there’s still the pandemic, McMillan says. “And that’s the same as it ever was.”
What’s more, both Trump or Biden will face the same pressure as president to get a stimulus deal passed, McMillan says. And while there’s presumption of a lot of disruption surrounding the election and its eventual outcome, McMillan says those financial disruptors that you prepare for are “usually not so bad”—and Wall Street isn’t likely to be so rattled by what happens.
The potential for a so-called “blue wave”—in which Democrats take control of the White House, Senate and the House of Representatives—does raise some additional questions of the implications for the market, James notes, though. Still, he cautions that long-term investors should avoid making politically motivated decisions with their portfolio.
“If you try to do your investing based on politics, then you’re mining for fool’s gold,” James says.
The U.S. economy expanded at its fastest ever pace of 33% in the third quarter, but that also followed the worst quarter in history, according to figures released October 29 by the Commerce Department. That result wasn’t altogether surprising, given the unprecedented impact of the coronavirus pandemic on the economy.
In the month ahead, professional investors will watch for other signs that the pace of economic growth is improving. One place to find those signs: Earnings season—the multi-week period when publicly traded companies report results for the prior quarter—which is showing that corporate America fared better than analysts had expected in the third quarter.
“If that trend continues, are we starting to move past the economic aspect of the pandemic?” McMillan asks. “There are reasons to think we may be.”
Specifically, McMillan says he’s monitoring business confidence as measured by surveys from the Institute for Supply Management (ISM), which shows that “things are actually looking quite good.” While not yet back to levels from earlier this year, business confidence is near where it was back in February 2019, which is relatively high on a historic basis, and a slight improvement could signal the economy is moving out of the recession, he adds.
The October ISM survey of manufacturing industry performance drops on November 2 and the ISM services survey arrives on November 4.
Then there’s job growth, which remains sluggish. McMillan will watch the October jobs report, due on November 6, to see if job creation has accelerated. He’ll be looking for signs that job has truly bottomed, and is on the upswing. During the past four recessions, the economic downturn had already ended once the jobs market bottomed, he adds. “We need to see job growth turn a corner.”
Meanwhile, James will be monitoring the monthly retail sales report, which is due on November 17. This measure of consumer spending jumped 1.9% in September from August, and there are “a lot of good things” happening related to spending in the automobile and the housing industries, James says. While some of that is offset by weakness in the hospitality and travel industries, he says there’s reason to be optimistic about consumers again.
Consumer spending is a vital part of the broader economy, accounting for nearly 70% of GDP as of the third quarter.
The election outcome and second/third wave of the coronavirus pandemic are likely to dominate headlines in November, causing more short-term turbulence in the stock market. Watch the VIX—the Chicago Board Options Exchange’s CBOE Volatility Index—to compare just how turbulent things may become.
The VIX is often referred to as Wall Street’s fear gauge, and it’s certainly suggesting some trepidation. This measure of volatility expectations over the next 30 days jumped to the highest level since April on Oct. 28.
Still, there’s a major catalyst for stocks that could make another appearance: Quantitative easing (QE). The Federal Reserve deploys this unconventional monetary policy tool to buy Treasuries and other securities to support markets and the economy. When the stock market was returning to normal following the bear market earlier this year, the Fed eased up on QE—but if things get dicey again, it could change its stance.
“The QE program is like an unstoppable force,” James says. “When the Fed decides to do that, it is very, very good for stocks.”
Fed policymakers are set to convene on November 4 and 5 for one of eight scheduled annual meetings, though it can make decisions about QE outside of these meetings.
Investors who can look past the near-term causes of uncertainty may find reason to be optimistic, both about the market and the economy, according to McMillan. “Big picture, things are actually more solid than they look.”
Strategists on Wall Street agree. They forecast the S&P 500 will end the year about 3.7% higher than it began, according to the median estimate as of mid-October of strategists surveyed by CNBC. At its worst in March, this benchmark was down nearly 31% for the year.
Looking ahead, an acceleration in the U.S. economy could benefit shares of small-cap companies, James notes. And there’s even the potential these stocks could outperform their large-cap counterparts, he adds. Unlike the other major benchmarks, the Russell 2000 Index has yet to surpass its pre-pandemic high from February.
Still, investors need to be prepared for more wild moves in the market in November and stay focused on the long-term outlook ahead, according to McMillan. “Right now with everybody looking for the end of the world, I think there’s a real possibility there’s more upside than downside in the market,” he says. “Things could get much better, much faster, than anybody thinks.”
Author: Anna-Louise Jackson
Stock Market News for Nov 2, 2020
U.S. stock markets closed lower on Friday, reversing gains from the previous day as COVID-19 cases continued to mount across the United States and Europe. Moreover, investors also remained in the sidelines ahead of the upcoming presidential election on Nov 3. All three major stock indexes ended the day in red.
The Dow Jones Industrial Average (DJI) plunged 0.6%, or 157.5 points, closing at 26,501.60, reversing its gains from Thursday. Notably, 17 components of the 30-stock index ended in red while 13 finished the day in green. The blue-chip index is 7.1% below to become green year to date. The tech-heavy Nasdaq Composite closed the day at 10,911.59, down 274 points or 2.5%, on the back of weak performance by large-cap technology stocks, snapping its gains from Thursday.
Meanwhile, the S&P 500 lost 1.2%, closing the day at 3,269.96, giving up its gains from Thursday. The Technology Select Sector SPDR (XLK) and the Consumer Discretionary Select Sector SPDR (XLY) dipped 2.2% and 2.2%, respectively. Notably, nine out of eleven sectors of the benchmark index closed in the negative zone. Major loser of the S&P 500 was Twitter Inc. (TWTR – Free Report) that plunged 21.1%. Twitter carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The fear-gauge CBOE Volatility Index (VIX) was up 1.1% to 38.02. A total of 10.3 billion shares were traded on Friday. Decliners outnumbered advancers on the NYSE by a 1.83-to-1 ratio. On Nasdaq, a 2.63-to-1 ratio favored declining issues.
U.S. markets were rattled by the continued rise in COVID-19 cases. On Oct 29, The United States reported 90,728 new cases, as per the New York Times tracker, with the seven-day moving average hitting 77,865. COVID-19 cases have risen in other countries across Europe, enforcing them to put renewed restrictions in place.
Various political experts have predicted that the upcoming presidential election will be a closely contested one. Historically, stock markets have remained volatile in the month before the election. Market participants generally choose to hold cash instead of investing in risky assets like equities while assessing the economic and financial consequences of the election result.
Moreover, arriving at a deal for the coronavirus stimulus package before the election seems even more unlikely with the U.S. Senate now adjourned till Nov 9. Meanwhile, the Democrats have reduced the deal size to $2.2 trillion from $3.4 trillion demanded earlier while the Republicans have raised the deal size to $1.8 trillion from $1 trillion initially offered.
The U.S. Bureau of Economic Analysis reported that personal income increased 0.9% in September after witnessing a fall of 2.9% in August (revised), beating the consensus estimate of 0.2% increase. Personal spending increased 1.4% in September, surpassing the consensus estimate of 1%.
Personal savings rate witnessed an increase of 14.3% from August’s revised growth of 14.8%. Disposable personal income also returned to a growth path, reporting an increase of 0.9% after a revised dip of 2.9% in August.
Personal consumption expenditure (PCE) inflation increased 1.2% in September following an increase of 0.7% in August. Core PCE inflation in September increased 0.2% after a 0.3% increase in August, in-line with the consensus estimate of 0.2%.
Per the data released by ISM Chicago, the Chicago PMI dipped to 61.1 in October following an increase of 62.4 in September, but surpassing the consensus estimate of 58.4. This marks the fourth consecutive month of reading of above 50 which indicates an expansion in manufacturing activity.
The U.S. Bureau of Labor Statistics reported that the employment cost index for third-quarter 2020 increased 0.5%, missing the consensus estimate of 0.6% increase, following a 0.5% increase in the April-June quarter.
As per the University of Michigan’s survey, index of consumer sentiment rose to a revised 81.8 in October from 81.2 reported initially, beating the consensus estimate of 81.2.
U.S. stock markets saw major indexes declining during the week as the Dow, the S&P 500 and the Nasdaq Composite dipped 6.5%, 5.6% and 5.5%, respectively. This marked the largest weekly decline for the indexes since March. Spike in COVID-19 infections and upcoming U.S. presidential election are the main reasons for market volatility.
U.S. stock markets witnessed two consecutive months of decline for the first time since March as major indexes closed October with losses. All the three major stock indexes – the Dow, the S&P 500 and the Nasdaq Composite – tumbled 4.6%, 2.8% and 2.3%, respectively.
Rising coronavirus cases across the United States with new restrictions being imposed across Europe, stalled talks regarding a new fiscal stimulus package and uncertainty over the upcoming presidential elections have contributed to the volatility.
Last year, it generated $24 billion in global revenues. By 2020, it’s predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce “”the world’s first trillionaires,”” but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks’ 3 Best Stocks to Play This Trend >>
Author: Zacks Investment Research
NFL trade rumors: Will Giants do anything at the trade deadline?
The New York Giants have a game Monday night against the Tampa Bay Buccaneers. The real intrigue, though, is whether or not the 1-6 Giants will make any further moves before Tuesday’s 4 p.m. ET NFL trade deadline.
The Giants already shipped off one veteran who didn’t seem to fit their future, or even current, plans by sending edge defender Markus Golden to the Arizona Cardinals in exchange for a 2021 sixth-round pick.
Coach Joe Judge has said he does not expect a sell-off, or as he put it a “string of moves.” What makes sense and what doesn’t for the Giants? Let’s discuss.
WR Golden Tate — The 32-year-old Tate signed a four-year, $37.5 million deal with the Giants before the 2019 season. The Giants could save $8.5 million against the 2021 salary cap by designating Tate a post-June release next offseason, and the smart money would likely say it’s a good bet the Giants will do just that.
Former Minnesota Vikings GM Jeff Diamond told Big Blue View a couple of weeks ago that Tate “isn’t tradeable because of his age and contract. What, though, if he is? Mohamed Sanu, an inferior player to Tate, fetched a second-round draft pick from the New England Patriots a season ago.
If there is a contending team out there willing to offer the Giants a fifth- or sixth-round pick, and I don’t know that there is, the Giants probably have to take it. The counter-argument is that they have a horrible offense now that doesn’t feature enough reliable weapons to truly judge second-year quarterback Daniel Jones. Sending Tate packing could make Jones’ life even more difficult for the remainder of the season.
OG Kevin Zeitler — The 30-year-old has one year left on a three-year, $32 million contract. He carried a $14.5 million cap hit next season that the Giants, with the cap expected to shrink, may not be able to afford.
Zeitler has been a good player since being chosen in the first round by the Cincinnati Bengals in 2012, but he hasn’t played up to his career standards this season. Is he regressing or being impacted by either an injury we don’t know about or the struggles of players around him? We don’t know for sure, but if they think he is regressing and they can get a mid-round pick for him it’s another move that would make sense.
The Giants do have fifth-round pick Shane Lemieux and have acknowledged they want to find him playing time.
The Giants could also use Chad Slade at guard or slide Cam Fleming inside for a few games and use rookie Matt Peart at right tackle.
After his huge drop in Week 7 against the Philadelphia Eagles there was a huge outcry to trade Evan Engram. There are certainly Giants fans who are still done with the 2017 first-round pick.
The Giants could certainly find a taker for a player with Engram’s skill set. Problem is, it increasingly seems like they won’t be able to find one that would offer more than a Day 3 draft pick. As frustrating as Engram can be, that means odds are the Giants won’t find a player as productive as he is with whatever pick they get back. Also, trading Engram brings us back to the argument about giving Jones a chance to succeed.
I know, I know. Leonard Williams. But, there was word from Jordan Ranaan of ESPN that the Giants asked what the price might be for Detroit Lions wide receiver Kenny Golladay, who is still on his rookie contract. That apparently went nowhere. There is also word that Cincinnati wide receiver John Ross is desperately seeking a new home. Ross has been a disappointment, but as desperately as the Giants need speed would it be a horrible thing to offer a 2022 seventh-round pick (the Giants don’t have a 2021 seventh) to take a flier? It’s probably not happening, but might be worth discussion.
Author: Ed Valentine