New and now is what drives short-term changes in the investment markets. Lately, that has been the election. And the reaction has been good for shareholders.
Even though there was no quick and clear winner immediately after Election Day, the S&P 500 and NASDAQ had their best post-election rally in history. The stock buying came despite a record day of COVID-19 infections in the U.S. and new economic restrictions in Europe to slow the spread of the virus.
Investors are confident similar restrictions will not return to the U.S. even as daily infections are increasing, and hospitalizations are reaching record levels in more than a dozen states. The state-level election results bear this out. Hardly any state legislative chamber is switching partisan hands, and most continue to be under GOP control, according to the National Conference of State Legislatures. COVID restrictions over business rules, curfews, and gathering sizes have been left to state and local governments.
Investors also are signaling increased confidence in a definitive election winner, and a split government. It's less about who wins, and more about the certainty of a winner.
Meantime, the market seems almost complacent with the coronavirus even if businesses aren't. Disney's ESPN unit is cutting 10% of its workforce, about 500 people, according to the Wall Street Journal. Sports may be back, but the germ has accelerated changes in how sports programs are produced. (Full disclosure: I own 100 Disney shares.) Retailers are looking at a pandemic holiday selling season. Cruise ships remain docked. Winter vacations may be on hold. Local government hiring freezes remain in place.
As the emotions of the election give way to the results, investor attention will return to the infection count in the week ahead. Markets will look for assurances this wave won't crash the economy.
