A November To Remember

The State of the Market

A November to remember is showing no signs of letting up in the early going Tuesday. Already the best month in history save October 1987, the month's impressive returns look to expand further today. For those of you keeping score at home, the S&P 500 sports a gain of 6.4% for the month through Monday's close while the small caps (using the Russell 2000 ETF - IWM as a proxy) are on fire with the rotation trade pushing the market's "troops" up nearly 3X its blue-chip brethren.

The impetus for today's buying appears to be two-fold. First, traders seem to be breathing a sigh of relief that a Constitutional crisis no longer appears likely relating to the transfer of Presidential power. In case you missed it, the Trump Administration announced Monday evening that the GSA would begin to cooperate with the President-elect transition. While not exactly a concession, this does appear to be an admission that the Trump era is coming to a close.

The second reason du jour for further rallying in stocks looks to be the announcement that Biden has selected Janet Yellen to be Secretary of the Treasury. The reasons for the positive response here are pretty straightforward. First, the former Fed Chair is a notorious dove (I.E. she won't be calling for higher rates anytime soon). In addition, she has stated publicly that pulling back on spending at this time would be a mistake. As such, her views dovetail nicely with those of Jay Powell's.

The thinking here from a stock market perspective is that the Yellen/Powell team would likely seek a stimulus package at the high end of (or perhaps exceeding) the current range. And while Mitch McConnell's bunch will likely object, the stock market tends to like money flowing into the hands of consumers and, in turn, the U.S. economy.

So for now anyway, it appears that the stock market will continue to look beyond the near-term problems the economy is likely to encounter as well as the anticipated surge in COVID cases, hospitalizations, and deaths after the Thanksgiving holiday. Always cold-hearted by nature, Ms. Market looks to be ignoring the COVID situation (i.e. something everyone already knows) and instead is looking ahead to a time when the majority of Americans have been vaccinated and economic activity begins to normalize.

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The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning's opinions and viewpoints regarding the future of the markets should ...

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