Market Perspective 11/13

With great admiration, we honor U.S. military veterans for their service and sacrifice to our country.  

On the 11th hour of the 11th day of the 11th month of 1918, World War I formally ended. A year later, Woodrow Wilson, who was president during all of WWI, which coincided with the Spanish Flu pandemic, issued this uplifting message on the first Armistice Day (later changed to Veterans Day). A lot has changed over the past 101 years and while parts of this message may be dated, others remain relevant to the challenges we face today and worthy of sharing.  

A year ago today our enemies laid down their arms in accordance with an armistice which rendered them impotent to renew hostilities, and gave to the world an assured opportunity to reconstruct its shattered order and to work out in peace a new and juster set of international relations. The soldiers and people of the European Allies had fought and endured for more than four years to uphold the barrier of civilization against the aggressions of armed force. We ourselves had been in the conflict something more than a year and a half. 

With splendid forgetfulness of mere personal concerns, we remodeled our industries, concentrated our financial resources, increased our agricultural output, and assembled a great army, so that at the last our power was a decisive factor in the victory. We were able to bring the vast resources, material and moral, of a great and free people to the assistance of our associates in Europe who had suffered and sacrificed without limit in the cause for which we fought. 

Out of this victory there arose new possibilities of political freedom and economic concert. The war showed us the strength of great nations acting together for high purposes, and the victory of arms foretells the enduring conquests which can be made in peace when nations act justly and in furtherance of the common interests of men. 

To us in America the reflections of Armistice Day will be filled with solemn pride in the heroism of those who died in the country's service, and with gratitude for the victory, both because of the thing from which it has freed us and because of the opportunity it has given America to show her sympathy with peace and justice in the councils of nations. 

-- Woodrow Wilson 

Market Comments  

• Stock markets, broadly, were positive on the week (up over 2% for the S&P 500), helped in part by optimistic vaccine news from Pfizer and BioNTech 

• Cyclical, value, and smaller U.S. stocks outperformed traditional growth stocks (technology, FAANGs)  

• Too soon to determine any trend, however, rotations favoring cyclical and smaller companies tend to occur coming out of a recessionary period 

• U.S. stock funds attracted $32.5 billion for the one-week period ending Nov 11, which was the second highest inflow into U.S. stock funds on record (source: Factset, Inc.) 

• Likely reasons for investors adding to stock funds: vaccine optimism and investors waiting until after elections  

• Corporate earnings have continued to provide support to stock market prices; 90% of companies in the S&P 500 have now reported results for the third quarter with announcements generally better than expectations 

• Financial markets place probabilities on Federal Reserve interest rate policy actions; as of this week, the markets place a 90% probability on no changes to short term interest rates through July of next year (source: Factset, Inc. 11/13/20) 

• In other words, the market is anticipating continued low short-term interest rates  

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