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Stocks Charge Ahead

November was dominated by politics and COVID vaccines as these two key macroeconomic variables came into greater focus, helping contribute to strong, broad based gains across equity markets.

US equities rose substantially over the course of November, with particularly strong gains in more economically sensitive areas of the market (e.g., value stocks, small-caps, cyclicals).

The bond market was much quieter. Despite rising rates and volatility during the first half of the month, interest rates gradually slipped from there, ending the month back where they started.

Our Perspective

We believe markets are reacting to an array of cross currents, of which, political and vaccine results are just a piece.

For example, we believe the economic cycle has reset, and usually it is good to be overweight equities during the early stages of recovery. Yet, we also believe that the COVID trend is not good, the economic recovery is stalling, and that market sentiment is bullish at the moment.

A variety of cyclical, secular, and exogenous variables are likely to continue driving market volatility to both the upside and downside. Investors should remain focused on long-term goals and objectives, and their plan that will help them get there

Understanding 5G

US cell phone carriers have started marketing their new 5G networks ahead of the holiday season, hoping to capture some of the high consumer technology spend over the five weeks.

Although 5G means faster cellular service, better downloads, clearer video conferencing, and more, it also means worse battery life and short range. Additionally, it is expensive to roll out, causing the carriers to only trial the fastest technologies in large, populous cities.

Our Perspective

5G sounds impressive, but the hype surrounding it may be overplayed. 4G tends to meet most day-to-day use cases with plenty of speed.

Increasing popularity for 5G does, however, reflect the relentless push for more, faster data. A 5G upgrade cycle could mean a substantial uptick in demand for the industries that underly internet connectivity, including businesses in data storage, cloud computing, semi-conductors, and gaming.

For more, check out our recent blog post, Looking Beyond the Hype in 5G

More Clarity in DC

Even though the final Senate composition will not be known until January, the elections removed a veil of uncertainty that had been hanging over markets all year.

Our Perspective

The mixed election results should allow investors to breathe a little easier on controversial, difficult to address issues, such as tax policy and health care. Without the full support of Congress, it’s unlikely that the new administration will be able to pass the more extreme proposals of the campaign trail.

On the other side of the coin, this split will continue to make it difficult, if not impossible, to pass significant fiscal spending, potentially harming an already weakening economic recovery. We will continue to monitor the evolving political landscape for its impact on the economy, markets, and your portfolio.

For more, check out our recent blog post, Four Things We’re Thinking About Post-Election.

Our View
Economic Cycle		The US is in the very early stages of the economic cycle, although there are indications that the recovery is stalling; the pace of the recovery will remain governed by the threat of another wave of economic lockdowns, the potential for additional fiscal stimulus, and the speed at which economic activity, business confidence, and consumer confidence normalize
Stock Market		The US stock market pushed to new highs last month, and is now well past pre-pandemic levels; valuations are again looking elevated, particularly in certain high growth areas of the market
Bond Market		Negative and ultra-low interest rates across the globe will remain a major challenge for longterm fixed income returns; credit spreads have tightened from peak levels, but still offer decent value
Foreign Exchange		While we believe the dollar may weaken longer term, short-term, it is difficult to make the argument that currencies will swing significantly
Important Issues on the Radar		Coronavirus: recent flare ups in the US and Europe have resulted in Europe re-imposing strict lockdowns and the US seeing rolling restrictions, with each acting as headwinds to the recovery Trade Tensions: relations have been in decline for some time, and while we expect a Biden Presidency to be less aggressive, the long-term trend will remain in place US Politics: While it seems inevitable that President Trump will eventually acknowledge the election results and vacate the office, the process will be noisy and the principle concern is the run-off election for the two Senate seats in Georgia Inflation vs. Deflation: the significant demand shock makes it hard to call for inflation, but the sheer size of fiscal and monetary programs around the world should be a cause for concern

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All investments contain risk and may lose value. This material contains the opinions of Manning & Napier, which are subject to change based on evolving market and economic conditions. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

This newsletter may contain factual business information concerning Manning & Napier, Inc. and is not intended for the use of investors or potential investors in Manning & Napier, Inc. It is not an offer to sell securities and it is not soliciting an offer to buy any securities of Manning & Napier, Inc.