The blend of vaccine optimism and a worsening pandemic continue to dictate markets this week. The emergence of new vaccines spurred markets while the more immediate reality of the pandemic was brought into focus as the number of U.S. fatalities surpassed 250,000. Big daily moves brought volatility but ultimately left markets little changed over the week.
The S&P 500 and the Dow both fell 0.7%, Their first negative week in the last three, while the NASDAQ Composite finished the week up 0.2%.
President Trump received what could prove to be a fatal blow in his bid to overturn the election. A federal judge in Pennsylvania threw out a lawsuit filed by his lawyers that aimed to overturn the result of the election.
In stock-specific news, Tesla, the poster child of electric vehicles and stock market enthusiasm, rose sharply this week as the company was included in the S&P 500 at the second time of asking despite being snubbed last quarter. Tesla’s share price jump was not altogether surprising given the benefits that come with being included in the largest index in the world. This inclusion will likely result in a reduction in stock price volatility, a wider following of investors (if that’s possible), prestige, and more. The carmaker jumped 20% over the week and is now up almost 500% YTD.
For the second week in a row, U.S. small-cap stocks outperformed the broader market by a wide margin, as the Russell 2000 Index climbed more than 2%.
The dollar was also caught between two opposing forces. Extended uncertainty supported it while fresh speculation over monetary easing to boost the economy held it back somewhat, finishing the week down 0.3%
0.83%US 10Y TREASURY YIELD
U.S. Treasury yields fell this week as the country’s death toll from the coronavirus topped 250,000 and states sought to impose restrictions to curb the spread of the virus. Yields fell further on Friday following Steven Mnuchin’s announcement that he would not be extending most of the emergency lending programs that his agency has been running in tandem with the Federal Reserve’s, with the programs now set to expire on Dec. 31.
Bitcoin extended its recent rally, rising about 14% for the week following a mega bullish call from Citibank. The price has now risen nearly 160% year-to-date.
The market seems to have reached a delicate balance now where, on the one hand, many investors are willing to look beyond the temporary resurgence of the virus to the ‘light at the end of the tunnel,’ whilst others remain apprehensive about the testing months ahead.
Despite the recent strong performance in equity markets, many analysts remain optimistic, expecting continued growth into 2021 as further FDA approvals and stimulus packages support the stock markets bull case.