Financial Research

FSI Sector Allocation

FSI Sector Allocation

Despite the ongoing election controversies and the continued rise in COVID19 cases, November has been a great month for equity markets. Indeed, the Standard & Poor’s 500 index has risen over 10%, again reaching all time highs during the month. Importantly, there have been positive developments on the COVID19 vaccine front that have shifted the investor outlook away from the current negative pandemic data to a potentially more optimistic future environment where global economies begin to reopen and heal.

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2020 October Outlook

September has not been friendly to equity investors as it has posted the first decline of greater than 10% since the important March 23 trough near S&P 2200. That level was not only the nadir for 2020 but was also the lowest point for equities dating back to 4Q16. Although it was the first double-digit drawdown over the last six months, it was the fourth decline greater than 5%. These were all dips and buy opportunities within the context of an ongoing recovery rally. Many bearish forecasters have once again become quite vocal about all the reasons why the magnitude of the rally has not made sense, why the current pullback was so obvious, and why the investing backdrop has clearly had a negative shift. From our perspective, we disagree with these somber views.

2020 November Outlook

After a challenging September, October started off promising with the hopes that an agreement on a new fiscal stimulus would get passed. Indeed, the S&P 500 rallied nearly 5% to its October 12th peak near 3550 only to get disappointed by the lack of and agreement. The back half of October was hit by a negative trifecta of no stimulus deal, rising COVID cases and the return of lockdowns in Europe, and the ongoing uncertainty surrounding the upcoming Presidential election.

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Illustrations by Karl Wimer.