The news of a Biden/Harris election win and heightened prospects for a COVID-19 vaccine are being digested by markets today. As for the former, news agencies declared Democrat Joe Biden president-elect and control of the Senate is to come down to two run-off races in Georgia. For the latter, hopes of a COVID-19 vaccine linked to an announcement of progress toward a vaccine sent global stock indices soaring this morning. The ground beneath this year’s two most dominant themes — politics and pandemic — is moving.

The political shift is assumed to be toward the “middle” with an expectation of divided government. While the Senate race outcome may be held off until January, a Biden win and divided Congress is likely to give way to incremental, rather than sweeping, change. Such an outcome narrows the range of potential effects for investors, providing some sense of stability for markets. The country has encountered deadlocked situations before, at times, with surprisingly positive outcomes for financial markets.

Just as divided governance may provide some temperance in the political sphere, so too does the current reality of COVID-19 in the realm of health and welfare. As we write this, the United States is reporting record numbers of new cases with almost 800,000 cases in the past week and over 1.3 million new cases in the past two weeks (Chart A, below), according to data from Johns Hopkins University. The country now has more than 9.4 million active cases as of last Wednesday. These numbers are significantly higher than in the spring and summer waves. Several states are implementing or planning to implement new restrictions to curb the spread of the virus. In this way, the potential for a difficult winter ahead due to COVID-19 weighs on the minds of many, despite good news on the vaccine front.

Chart A
U.S. COVID-19 Cases

Lift Continues

As the summer ended and fall set in, we found that most trends seemed to support continued expansion. The bounce-back from the onset of the pandemic and related shutdowns, supported by $2.4 trillion (11.8% of GDP) fiscal measures and massive monetary policy supports, continued into the fall. For example, the October ISM Manufacturing Index, a measure of expected manufacturing output, rose to a two-year high of 59.3 from 55.4 in September. Also, the 4-week average of weekly jobless claims fell to 787,000, down from an April record of 5.5 million, implying continued progress toward job market recovery. Lastly, the U.S. stock market has risen in value to a record high of nearly $39 trillion, 8% above the February pre-COVID-19 high of $36 trillion, and 70% above the March low of $23 trillion.

Based on this and other incoming data, we see conditions as remaining favorable for growth, and our near-term forecast path for the WCA Barometer (below) remains favorable for equities. Equity exposure was increased, and bond exposure decreased to account for some improvement in the near-term outlook at the start of the month.

Indeed, major themes are shifting in important new ways. Politics and the pandemic have the potential to shape markets in the weeks and months ahead.

Chart B
WCA Conditions Barometer

Kevin R. Caron, CFA
Senior Portfolio Manager

Chad Morganlander
Senior Portfolio Manager

Matthew Battipaglia
Portfolio Manager

Steve Lerit, CFA
Senior Risk Manager

Paul Clark, CFA
Senior Portfolio Manager
Municipal Fixed Income

Rick Marrone
Senior Portfolio Manager
Municipal Fixed Income

Daniel Urbanowicz
Senior Portfolio Manager
Municipal Fixed Income

Suzanne Ashley
Internal Relationship Manager

Eric Needham
Director, External Sales and Marketing

Jeffrey Battipaglia
External Sales and Marketing


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