Financial Market Roundup
Produced by Fifth Third's Investment Management Group

In the following piece, Fifth Third's Investment Management Group recaps the market and how it reacted to various events in the month of November.

GLOBAL
TRENDS

Yellow Arrow Pointing Right - Neutral

The COVID-19 pandemic has continued to have a major impact on life across the globe, and therefore economic activity, employment, and corporate earnings. Many countries continue to see a spike in cases as the winter season begins. Countries around the world have started returning to stricter COVID-19 related guidelines with potential for additional restrictions. While many pharmaceutical companies have made major developments in vaccine production, with some applying for emergency permission for usage, approval for mass distribution has not yet been reached. The COVID-19 impact, financial conditions, energy market volatility, trade developments, geopolitical threats, and central bank policy actions are items of interest that the Investment Management Group is actively monitoring.

CENTRAL BANK
POLICIES

Green Arrow Pointing Up - Positive

Global central banks continued to support the global economy by maintaining low interest rates and implementing programs to increase market liquidity in response to the COVID-19 pandemic. The Federal Reserve held policy unchanged at its November meeting. Fed Chair Jerome Powell said at his press conference that the outlook remained “extraordinarily uncertain” and rising COVID-19 infection rates are “particularly concerning.” The European Central Bank left policy unchanged at its late October meeting, but signaled there may be more stimulus in the coming months. The Bank of Japan also held monetary policy unchanged at its latest meeting and has vowed to act as needed amid virus uncertainty.

EQUITY
PERFORMANCE

Green Arrow Pointing Up - Positive

U.S. equities rallied in November, with the S&P 500 Index gaining 10.9% in total return, the most since April. The Dow Jones Industrial Average rose 12.1%, its biggest monthly gain since 1987, while the tech-heavy NASDAQ Composite rose 11.9%. International stocks gained, with the MSCI All Country World index of developing and developed market stocks adding 12.4% for the month. November’s rally came amid a slew of positive COVID-19 vaccine news, which lifted hope of a strong economic recovery. Two major pharmaceutical companies applied for emergency use in the U.S. and Europe, after their vaccines proved more than 95% effective in trials. The removal of U.S. election uncertainty also boosted stocks and tempered volatility.

INTEREST RATES
AND GROWTH

Green Arrow Pointing Up - Positive

Yields fell modestly in November. The yield on the benchmark 10-year U.S. Treasury finished November at 0.84%, down 3 basis points from the prior month. The 10-year U.S. Treasury yield jumped to the highest since March at one point, as positive COVID-19 vaccine news drove investors out of traditionally safe assets. The U.S. economy surged to a record 33.1% annualized growth rate in the third quarter, following a record 31.4% contraction in the prior quarter amid virus-related shutdowns. Consumer spending also rebounded, gaining an annualized 40.6% in the third quarter. The path of the global economic recovery for the remainder of 2020 remains uncertain and will depend on the combination of COVID-19 containment and subsequent lifting of economic restrictions.

POLITICAL AND
REGULATORY TRENDS

Green Arrow Pointing Up - Positive

The winners of November’s U.S. presidential and congressional elections will dictate economic and regulatory trends for the prospective four years. As of publication, the most likely result, but by no means certain, is for a Joe Biden presidency and a dividend Congress (Republican controlled Senate; Democratic controlled House of Representatives). Congress has not yet agreed on additional stimulus measures to help support the U.S. economy, though President-elect Joe Biden has marked it as a top priority along with getting the COVID-19 pandemic under control. The Biden Administration is currently in the process of selecting key cabinet members who will add experience and diversity, with an objective to help tackle the pandemic and build a strong economic and environmental recovery.

INVESTMENT
TRENDS

Yellow Arrow Pointing Right - Neutral

Uncertainty remains a key theme as the world continues to battle against the COVID-19 pandemic, despite the potential release of a vaccine in the near future. Political uncertainty eased in November, as the results of the U.S. election became clearer. Central banks and governments continue to offer monetary and fiscal stimulus, which has cushioned financial markets since the March bottom. While markets are feeding off of economic information that certain indicators, such as consumer spending and housing are improving, other areas of the economy remain severely depressed, such as the labor and travel industries. The strong efforts that both Governments and pharmaceutical companies have put into a vaccine are starting to prove well placed and has helped many investors remain hopeful that the COVID-19 pandemic will be better contained, and that economies will continue to recover.