Equity markets are set to close their best month since April and second-best since 1987, with the S&P 500® Index up 11% through Friday. The rally was driven primarily by vaccine news that could lead to initial distribution in the next few weeks. Other factors include a resolution to election season, continued supportive monetary policy, the continued hope for an additional fiscal stimulus deal and a rebound in corporate earnings.
Global markets continue their strong performance, as the MSCI World Index has soared 13% in November, the best performance on record. This was led by gains in Greece (+29%), Spain (+27%) and Italy (+25%). Small cap indexes are leading the way domestically, with the Russell 2000 gaining 21%, the best gain on record dating back to 1979. Value indexes showed strong relative performance, with the Russell 1000 Value (+14%) beating the Russell 1000 Growth (+10%).
While many economically cyclical areas are showing strong recent relative performance, certain pockets of the market continue to lag, as they are more susceptible to the shutdown and are more reliant on an additional stimulus package. Within the equity market, the energy sector is the weakest year-to-date (-36%), followed by financials (-8%) and real estate (-5%). In fixed income, negative year-to-date returns are seen in high-yield energy E&P (-12%), high-yield leisure (-7%), lower-rated CMBS (-4%) and high-yield emerging market (-3%).
Moderna released the complete data from their phase three trial, showing 94.1% effectiveness. The company plans to ask U.S. and European officials for early use authorization, expecting a panel to vote on December 17. This will follow a similar meeting on December 10 to discuss Pfizer and BioNTech’s candidate. Distribution is expected to begin within 24 to 48 hours after approval.
Unsurprisingly, Black Friday saw foot traffic down 48% from a year ago, with physical store sales down 30%, per RetailNext. Adobe Analytics said online spending jumped 22% from a year ago to $9B, making it the second-best online shopping day it has ever measured, though it was at the low end of a projected growth range of 20-42%. Categories leveraged to at-home trends (electronics, athletic and casual apparel) continued to lead. The firm expects Cyber Monday to set a record, with online sales of at least $10.8 billion or growth of at least 15% from last year.
The M&A and IPO markets are beginning to accelerate, more reflective of late-cycle behavior than early-cycle, as companies lean on non-organic means to grow. S&P Global announced a deal to buy IHS Market for $44 billion, marking the second-largest deal this year. Global M&A volume is down roughly 12% from a year ago, though activity has accelerated over the past several months, particularly among technology and health care companies. Door Dash and Airbnb are eyeing initial public offerings above previous estimates, with Airbnb likely above $30 billion valuation and Door Dash above $25 billion. To date, we have seen more than $140 billion in IPOs this year, far exceeding the previous record of $108 billion in the technology bubble of 1999.
What to Watch
Important economic data this week include pending home sales on Monday, ISM manufacturing on Tuesday, the Fed’s Beige Book on Wednesday, ISM composite and non-manufacturing on Thursday, and durable goods on Friday.
Review relevant client material from Nationwide
This material is not a recommendation to buy, sell, hold or roll over any asset, adopt an investment strategy, retain a specific investment manager or use a particular account type. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. Investors should work with their financial professional to discuss their specific situation.
Nationwide Funds distributed by Nationwide Fund Distributors LLC (NFD), member FINRA, Columbus, Ohio. Nationwide Investment Services Corporation (NISC), member FINRA.