Wall Street ‘Breaks’ 40-Year Record – Historically Record November

November has ended, marking the largest monthly increase in the S&P 500 index in history, at +11.3 percent. In comparison, the previous record in November was from 1980, when the increase was 10.2 percent. The other leading American index, DOW JONES, also had a significant monthly increase, at 11.9 percent, which is its largest monthly growth since 1987.

Looking at sectors, the energy sector had the largest increase, over 30 percent in November, due to expectations that with the arrival of the vaccine, economies will rapidly begin to open, which will consequently lead to an increase in demand for oil and other energy sources. Accordingly, oil rose by as much as 26 percent in November, contributing to this positive performance of energy stocks.

The second-best sector in November was financial, where expectations are similar. With the economy returning to ‘normal’ and employment rising, banks and the entire financial sector will perform better, with expectations of better loan repayments and other obligations, better placements, and a reduction in large reserves that followed during the pandemic (which consequently led to reduced profits or losses).

Analysts predict that earnings of companies in the S&P 500 will increase by 23 percent next year after falling about 15 percent this year due to the coronavirus pandemic, according to IBES data from Refinitiv. It is expected that the most economically sensitive sectors will record the highest profit growth during 2021. Analysts expect that earnings of energy companies will increase by nearly 600 percent in 2021, while earnings of industrial companies will rise by 79 percent (also according to Refinitiv data).

After negotiations on a new stimulus plan failed before the elections, a new stimulus plan for the American economy is in preparation – currently worth 900 billion USD, which will likely be the subject of discussion in the coming days and weeks. It is expected that about 12 million Americans will lose unemployment coverage when the unemployment assistance programs (PUA) and emergency pandemic compensation (PEUC) expire on December 26, so this news is certainly welcome for the market.

Janet Yellen has been confirmed as the future Secretary of the Treasury in Biden’s administration, news that has been positively received on Wall Street. How this will affect relations with China is still unknown, but what is known are her previous positions, which advocate for free trade and international trade agreements. Speaking of China, President Trump announced an executive order banning all American companies from doing business with any Chinese company controlled by the Chinese military, including SMIC, the largest Chinese chip manufacturer, and CNOOC, a major oil and gas producer. The news did not provoke reactions on Wall Street, as the new administration and their moves regarding China are awaited.

In conclusion, if everything goes as expected and the vaccine begins to be used this month and early next year, the next market focus will be on the first moves of the new American administration and upcoming economic data in the near future.

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