07 Dec Capital 19 Catch-Up

November Breaks Records as Major Indices Hit All-Time Highs

Unusually, markets fell slightly on the last day in November. Historically, it has been one of the most positive days of the year. But the falls weren’t enough to halt a slew of records being broken in what will stand as one of the best Novembers on record for stockholders. The promise of a successful vaccine for the coronavirus saw the Dow and the S&P500 suffer only eight losing sessions in the month, while the Nasdaq got away with only seven.

The Dow finished up 11.8% for the month, which was its best since January 1987, and its best November month since 1928! The S&P500 and the Nasdaq gained 10.8% and 11.8% respectively, which was only their best months since April of this year. The Russel 2000, however, was up an impressive 18.3% for November in what was its best monthly performance of all time. If your portfolio was full of small caps you would have had a great one – although your last six months wouldn’t have been as impressive.

Boeing (BA) led the Dow after having their 737 Max planes receive the green light to take off again. BA made 45.9% for the month but is still down 31% year to date. American Express (AXP) had a similar fightback in November. It rose 30% for the month and is now back in the green with a 1.3% gain so far for 2020. Chevron (CVX), Honeywell (HON), Disney (DIS), Goldman Sachs (GS), and JPMorgan (JPM) also made more than 20% in November.

Despite an extremely impressive month for the US market, world markets were even stronger in November. No doubt a sign that a vaccine to end the global pandemic will bring a much-needed boost for the world economy as a whole. The MSCI World Index was just shy of its all-time monthly record, making 12.66% for the month. The global index holds 1,603 large and mid-cap stocks across 23 developed countries. The pan-European Stoxx 600 index was also impressive, notching its best November ever with a 13.73% gain. While back home the ASX200 had its best month since the index began back in March of 2000, up 10%. And the All ordinaries had its best month since March 1988.

If we break it down into sectors, it was the energy stocks that led the way. Of the 11 sectors in the S&P500, the energy sector was far and away the best performer, gaining 27.1%. The Financials came in second with an 18.6% move higher, while the Industrials made 15.4% in third position. Materials and Information Technology were the others to make double-digit gains, rising 13.4% and 12.8% respectively. While Utilities underperformed all others, making just 1%. The energy sector is still the worst-performing so far in 2020 however.

All this came as US coronavirus cases topped 14.8 million and the death toll rose above 282,000. Dr Anthony Fauci has warned that further restrictions would be needed over the holiday period, as the US headed into a “tough period of the pandemic”. LA County imposed a stay at home order through the week, and many hospital workers said they were past breaking point. We’ve now seen more than 2000 deaths a day for the past few weeks, with numbers likely to intensify after the Thanksgiving weekend which saw many Americans travel across the country despite medical advice to the opposite.

The negative news, however, was overshadowed by new data out of the Moderna (MRNA) trial which showed its new vaccine had a 94% efficacy rate. Moderna jumped more than 20% on the announcement and is now up more than 750% so far in 2020! Not a bad result if you were lucky enough to be holding the stock at the start of the year. Moderna has requested emergency clearance for the drug from the Food and Drug Administration. Next comes the monumental effort to get the world vaccinated.

The jobs numbers out this week were nothing to cheer about. The ADP Private payrolls showed an addition of 307,000 new jobs when the market was expecting 475,000. The weekly jobless claims were at their lowest of the pre-pandemic era at 712,000 which provided a glimmer of hope. However, the November nonfarm payrolls that came out on Friday saw only 245,000 jobs added when the market was expecting 440,000.

But it was another case of bad news is good news for the markets. The disappointing numbers just reinforced the need for a new stimulus package to reinvigorate the economy. Senate Minority leader Chuck Schumer tweeted the “report shows the need for strong, urgent emergency relief is more important than ever.” The stock market then rallied on the news.

The strong swing upwards in the Friday session saw all of the major indices hit all-time closing highs, as well as record intra-day highs. It was their fourth positive week in the last five. The Nasdaq led the way with a 2.2% gain, the S&P500 followed with a gain of 1.7%, while the Dow made 1% for the week.

In stock news, Salesforce (CRM) confirmed it would buy Slack Technologies (WORK) for $27.7 billion. For those of you who owned Slack through our Pandemic Portfolio, you’ll pick up $26.79 and .0776 shares of Salesforce per share you hold. That’s equal to approximately $45.86 per share. The stock traded at around $26 when we first bought them back in March.

Fellow pandemic portfolio stock Zoom Video (ZOOM) announced earnings this week that beat expectations on both revenue and profit but still fell 15% after the results. Its guidance was also ahead of expectations but had slowed slightly from previous quarters. Revenue was up 367% on an annualised basis, adding to the 355% it gained in the previous quarter. Despite the drop, Zoom is still up more than 180% since its March addition to the portfolio.

For the week ahead there will be more focus on those coronavirus numbers, but there will hopefully also be some good news with the FDA scheduled to review Pfizer’s vaccine on Thursday. Earnings wise we’ll see Catch Up fave Lululemon (LULU) in the spotlight, as well as Oracle (ORCL), Costco (COST) and GameStop (GME). And on the IPO front, DoorDash (DASH) and Airbnb (ABNB) are expected to price their offerings to the market.

Have a great week.