Weekly Market Update: the Holiday Season Rally.
Welcome to the weekly market update from Signature Wealth Management. I’m Brian Ransom, Research Director from Signature Wealth and here’s what happened in the market this week.
The market continues to rally out of the September pullback and we are currently making new highs each day for this week. This rally is reflected in the equal weighted index as well indicating that the ride higher is broad based throughout the entire market.
In the news this week, Merck received its first authorization in the UK for its COVID-19 antiviral treatment. A few days later, Pfizer announced the results from a similar treatment that showed 89% effectiveness against COVID-19. And the labor market continues to show strength with unemployment falling to a fresh 4.6% low.
With regards to the labor market, we can see the sudden impact of the pandemic on unemployment with a large spike to 14.8%. This is the highest unemployment rate since the Great Depression. Fortunately, that spike was short-lived as unemployment fell at a rapid rate. Simultaneously, we have seen wide spread wage growth that is now above the 50-year average further indicating growing strength of the US labor pool.
Recall from previous market updates that the month of September is typically the worst month for market returns in the S&P 500. This is a statistically significant phenomenon that has a variety of explanations. Now that we have entered into the winter months, a different phenomenon is observed. The holiday months of November and December feature fairly strong returns typically explained by year end bonuses entering the market place, interest payments on bonds that come at the end of the year, and general jovial temperaments that naturally come with the holiday season. Keep in mind, however, that this phenomenon is not a rule and there are exceptions. The end of 2018, for instance, featured a strong correction of around 20% peak-to-trough.
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1.FactSet Research Systems. (n.d.). S&P 500 (Interactive Charts). Retrieved November 5, 2021, from FactSet Database.
2.FactSet Research Systems. (n.d.). S&P 500 Equal Weight (Interactive Charts). Retrieved November 5, 2021, from FactSet Database.
3.FactSet Research Systems. (n.d.). S&P 500 (Historical Prices). Retrieved November 4, 2021, from FactSet Database.
4.JP Morgan Asset Management. Guide to the Markets. Slide 26 “Unemployment and Wages.” Updated October 31, 2021. Retrieved from https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/?c3apidt=p40886527386&gclid=Cj0KCQjwrJOMBhCZARIsAGEd4VHt_QYRONaCRttv4uZ7DNZWQiA1YjAJXM73oq4IKi8UzXWK6Z2LTncaAj7hEALw_wcB&gclsrc=aw.ds
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