To my clients:
It was an up week for North American stock markets with the Canadian TSX finishing up 2.2%; the U.S. Dow Jones Index finishing up 3.3%; and the U.S. S&P 500 finishing up 3.8%.
Very short update this week with the following bullet points:
- As I suggested last week, Trump was sure to receive aggressive treatment for his Covid-19 diagnosis last week. And so he did. It’s been said that the combination of therapies given to Trump may have been the only time during the pandemic that a single person anywhere in the world has received such an aggressive and exhaustive course of treatments. Trump is already touting his apparent recovery as an exemplar of why Americans should not fear the coronavirus – the “I told you so” card I suggested he and his supporters might play if he successfully recovered.
- I’ve been reluctant to previously write on this topic, but the U.S. Congress has been actively negotiating another fiscal stimulus bill for the country. It appears optimism on this front was a key pillar supporting stock market gains for the week. Federal Reserve Chairman Jerome Powell himself suggested that fiscal stimulus was essential to further support the ongoing economic recovery.
- Unlike last week’s Employment and Manufacturing reports, the ISM Service Index beat expectations this week. Further, at a reading of 57.8, this service sector reading is solidly in “good” territory.
- Regarding the virus, cases continue to rise in the U.S., Canada and Europe. It is this reason that largely keeps me cautious in client portfolios (still very slightly below neutral stock weighting in client portfolios). Colder unsettled weather is coming (appears already here in Vancouver today) and people will be forced to congregate inside more than during the summer. As such, already elevated infection numbers seem positioned to possibly surge higher given such conditions. Deaths too seem to be at the very early stages of possibly turning higher also.
- Lastly, the U.S. election is fast approaching. As I’ve frequently written in past years, positioning portfolios for an expected election outcome typically is an ill-advised course of action. That continues to be the stance put forth by myself and RBC. That said, the outcome of this particular election has a very high likelihood of being contested, and that – regardless of who wins - is a result that would have an equally high likelihood of “spooking” markets.
Overall, economic recovery continues, and certain sectors and companies are actually doing very well. But there are very large swaths of damage remaining that could, in fact, turn worse over the coming months. This, combined with the very real possibility that the U.S. election will be contested leaves me comfortable with the continued near neutral equity stance in portfolios.
That’s it for this week. Happy Thanksgiving and stay safe,
Nick Scholte, CIM, FCSI
Vice-President & Portfolio Manager
Scholte Wealth Management
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