Market Commentary - 2020-11-10

An Oxford Harriman & Company Commentary

It seems we avoided the potential election disaster scenario. Stocks moved higher last week as the worst-case scenario of a race with no declared winner combined with a nasty contested election seems to have been avoided. Despite talks of recounts and lawsuits regarding the election, the markets appear to believe the announced results will stand.

Our first observation is that the equity market appears to be comfortable with Biden winning the Presidency and a split Congress, although at this point Republicans holding their Senate majority is not guaranteed. A split Congress could act to temper dramatic tax increases and far left regulatory changes.

Our second observation is that in our opinion we are likely to have more stimulus and Central Bank accommodation. Additionally, we think the odds of a major infrastructure bill significantly increases with a Biden administration.

Our third observation is that earnings have been trending in a positive direction indicating that the recovery continues to move forward, albeit at a slower pace as we approached fall.

However, we received some significant COVID vaccine optimism on Monday that caused equity prices to move notably higher as we started this week (11/09/20).1 We will be watching this data closely and await further testing and FDA guidance before we start viewing COVID in the rear view mirror.

We view increases in COVID-19 and any bad news relating to the vaccine as a potential headwind for equities. Additionally, we view the possibility of Republicans losing their apparent Senate majority as another potential headwind for equities.

We will continue to stay informed on COVID-19 developments, the political landscape and the economy as we move towards the end of 2020.

Dennis P. Barba, Ph.D.
President & Managing Partner

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