New Highs - November 18, 2020

The Dow Jones Industrial Average1 eclipsed its February 12 high on Monday, which is the last of the major averages to break out to a new high.

The S&P 500 Index2 and the Nasdaq Composite3 had already topped prior peaks. Smaller companies, which have lagged, broke into new territory last week (WSJ, CNBC).

What’s behind the latest surge?

  • The election removed a cloud of uncertainty.
  • While we won’t know for sure until January, investors believe the Republicans will hold the Senate. Divided government is viewed favorably.
  • Two Covid-19 vaccines have been announced, reportedly 90% and 94% effective (WSJ, various sources).
  • The economy continues to expand, though the pace has moderated following Q3’s record rebound.
  • Q3 earnings are easily topping conservative forecasts (Refinitiv).

Investors corner

For now, investors are looking past the latest surge in Covid cases.

Though the health consequences shouldn’t be dismissed, investors believe the latest surge will eventually be contained, removing an obstacle to economic growth. A vaccine adds to the cautiously upbeat mood.

Record low interest rates and low bond yields add to the bullish mood, but is there too much complacency regarding low bond yields?

A well-diversified financial plan reduces overall risk while placing long-term investors on a path toward their financial goals.

If you are adhering to a holistic financial plan, you are to be congratulated. You are on the narrow path toward your financial goals.