November 2020 Portfolio Management Team Update

Elvis Picardo

November 16, 2020

Market & Economic Environment

 Global equities declined in October, posting their biggest weekly drop since March in the last week of the month. Risk appetite was hampered by lockdown measures in some countries that were necessitated by surging coronavirus cases, as well as uncertainty surrounding a potential U.S. stimulus deal.

The TSX Composite fell 3.4% last month, its second straight monthly decline. All 11 sectors retreated except for Health Care, with decliners led by the information technology, consumer staples and energy groups. In the U.S., disappointing earnings from some technology giants and uncertainty about the upcoming elections triggered a 5.6% pullback in the S&P 500, its worst-ever loss in the week leading to a presidential election. The S&P was down 2.8% for the month, while the Dow Jones Industrial Average tumbled 4.6% and the Nasdaq Composite fell 2.3%.

(Data Source: FactSet).

Our Strategy

Global markets have rallied strongly subsequent to month-end, as two of the biggest risk factors that had affected investor sentiment in the preceding months were significantly mitigated. Firstly, Joe Biden won the contentious U.S. Presidential election, and while President Trump continues to dispute the results at the time of writing, concerns about widespread violence on and after the November 3 election day have proved to be unfounded so far. Secondly, Pfizer announced on November 9 that its Covid-19 vaccine prevented over 90% of infections, causing global equities to surge, with the MSCI All Country Index adding as much as $1.8 trillion in market capitalization.

We rebalanced client portfolios on the eve of the presidential election, adding to positions in value stocks and other securities that had lagged the broad rally since March. On November 9, value stocks outperformed their growth counterparts by the biggest margin in at least two decades. Optimism about the Covid-19 vaccine caused a massive rotation, away from the “stay-at-home” stocks (such as technology) that had benefited from the pandemic and into companies in sectors like banking and energy that would gain as economies continue to recover.

As we head into the seasonally strongest time of year for equities, the Portfolio Management Team (PMT) is optimistic that 2020 will end on a positive note. The PMT is also comfortable with its positioning of client portfolios ahead of the economic recovery that is widely expected in 2021.

Please contact any member of the PMT if you have any questions or concerns regarding your accounts.