Overview: Stock markets had a strong week across the globe last week, as U.S. election results now suggest a divided Congress, with Republicans keeping control of the Senate. In the U.S., the S&P 500 Index was aided by the notion of reduced and delayed tax hikes and ended the week up by 7.4%. Optimism from the U.S. elections aided international stocks as well, in spite of increasing virus cases and heightened lockdowns being imposed. International developed stocks (EAFE) were up 8.1% for the week. In bonds, the 10-Year Treasury yield continued to trade in a narrow range and ended the week at 0.82%.
Election: On Saturday morning, the networks called the state of Pennsylvania for former Vice President Joe Biden, bringing his electoral vote total above the 270 thresholds. Barring any unlikely legal challenges, Joe Biden will become the 46th President of the United States. Congressional outcomes are still not certain, but the Senate vote currently favors Republicans while the House of Representatives will likely remain Democratic.
JP Morgan – Economic Outlook Commentary: Although the election captured the spotlight last week, we continued to receive economic data indicating the progress of the recovery. In October, total nonfarm payrolls increased by 638,000, reflecting private payroll growth of 906,000, partially offset by 268,000 fewer government jobs, of which 147,000 were temporary Census 2020 workers. The unemployment rate dropped to just 6.9%, with 11.1 million people unemployed. Of the 22 million jobs lost in the spring, cumulatively 54% have been regained, but that is a modest gain from 52% cumulatively last month and 48% the month before. There are still 5.2 million more people unemployed than before the pandemic, and the pace of gains is likely to slow further as the spread of the pandemic now exceeds 100,000 cases per day in the U.S. This could be a headwind in particular for service sectors, such as leisure and hospitality, retail, and professional and business services, which lost the most jobs early in the pandemic but have led payroll growth since then. With election uncertainty subsiding, investors should monitor the trajectory of the economic, labor market, and profit recoveries and maintain balance in portfolios as pandemic conditions worsen.
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