November Records Can Take Away Some December Gains

November is historically the best month of the year for some indexes in election years in the U.S.

According to LPL Financial Research data, this is the case for the S&P 500, as you can see in the chart below.

2020 has been an exceptional year, but it hasn’t been different in this statistic so far.

All major indexes registered losses Monday but were still able to close the month with strong gains.

The Dow jumped 11.84% in November, its best monthly performance since January 1987. 

The S&P 500 rose 10.75%, its biggest monthly gain ever.

And the Nasdaq Composite notched its 45th record close of the year in November and climbed 11.80%, its best month since April.

Despite all this optimism in the stock market, authorities warn it is necessary to be cautious because many uncertainties remain in the outlook.

Fed Chairman Jerome Powell said after the close of the market on Monday that the recent news on vaccines is “very positive” for the medium term, but “significant challenges” and uncertainties remain, “including timing, production and distribution, and efficacy across different groups.”

Powell also emphasized the importance of the Fed’s lending programs in use since March, which will expire at the end of the year.

Exuberance also abroad

In Europe, stocks also posted their best monthly gain on record in November.

The Stoxx 600, an index representing companies among Europe, not limited to the Eurozone, rose about 14%, registering its best monthly performance since its inception in 1986. 

Airlines stocks in the region, for instance, enjoyed a 45% jump, also a best month ever.

In a scenario similar to the U.S., the strong market performance doesn’t mean that Europe’s outlook is bright. 

The International Monetary Fund published a report Monday saying that unless Europe’s “pandemic dynamics change significantly” in the coming months, economic growth in the euro area is set to be weaker than previously forecast. 

According to the IMF, in the face of the ongoing second wave of the coronavirus, the region would probably need an extra fiscal and monetary stimulus to support the economy.

The Chinese blue-chip index CSI300 gained 5.6% for the month, while SSEC (Shanghai Composite Index)  added 5.2%, both posting their biggest monthly advance since July.

December is historically a strong month for equities, but according to some experts, the strength of November gains — with the Dow breaking 30,000 and the S&P hitting highs — can lead to a weaker December.

There’s also been increasing speculation the market could fall into a pullback phase soon.

COVID-Vaccines

The American drug maker Moderna said Monday it was requesting an emergency clearance from the Food and Drug Administration (FDA) for its COVID-19 vaccine after new data showed it was safe and more than 94% effective.

If the approval is granted, the company expects the first injections may be given as early as December 21.

The company also said it could produce 20 million doses by the end of December and 500 million to a billion in 2021. Each person needs two doses, administered a month apart, so 20 million doses will be enough for 10 million people.

Moderna’s vaccine was the second one to request approval in the U.S. from federal authorities.

The first one was the vaccine developed by Pfizer and its German partner BioNTech, on November 20.

The companies said the two-shots vaccine is 95% effective, and they can produce 1.35 billion doses by the end of 2021, including 50 million doses by the end of this year. 

An FDA meeting to evaluate Pfizer’s candidate vaccine has been scheduled for December 10. 

In a note published last week, Goldman Sachs forecasts that more than 70% of people in developed countries will get the vaccine by fall 2021, considering vaccines from leading drug makers like Pfizer-BioNTech, Moderna, AstraZeneca, Novavax, and Johnson & Johnson will be available.