Despite the setback for U.S. equity markets Monday, the S&P 500 limped along to the November finish line, climbing 10.8%.
This was the first year since 1982 that the S&P 500 has enjoyed two months with double-digit gains. The Russell 2000 rose 18.3% and the Nasdaq Composite Index finished the month 11.8% higher. The Dow Jones Industrial Average rose 11.8% in November, notching its best month since January 1987. By comparison, the Real Money Post Industrial Average (RMPIA) climbed 9.5% during the month, bringing its year to date move to 29%, well ahead of the 12.1% for the S&P 500 and the 3.9% move for the Dow.
RMPIA's November gain was broad-based, with only three constituents -- Biogen (BIIB) , Regeneron Pharmaceuticals (RGEN) and Thermo Fisher Scientific (TMO) falling month over month. Those declines were more than mitigated by the pronounced moves higher in Booking Holdings (BKNG) , Mastercard (MA) , Starbucks (SBUX) , Walgreen Boots Alliance (WBA) and CVS Health (CVS) . The common catalyst powering those shares and other RMPIA constituents higher in November was the positive wave of Covid-19 vaccine announcements from Moderna (MRNA) , Pfizer (PFE) , BioNTech (BNTX) and AstraZeneca (AZN) . While hopeful for that light at the end of the coronavirus tunnel, we have to acknowledge the rebounding case counts and subsequent measures to contain it are likely to poise a headwind in the coming months. Already, JPMorgan Chase has cut its March 2021 gross domestic product outlook to negative 1%, and odds are we could see other negative revisions to the current quarter GDP forecast of 3.3% for that quarter, according to The Wall Street Journal's Economic Forecasting Survey.
While equity markets kicked December off in a cheerful mood, Federal Reserve Chair Jerome Powell is a bit more humbug. The rising cases of Covid-19 in recent weeks "is concerning and could prove challenging for the next few months," said Powell to the U.S. Senate Committee on Banking, Housing, and Urban Affairs this week, according to a prepared statement. "A full economic recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities."
Powell will stress that fiscal support, such as enhanced and extended unemployment insurance benefits, helped fuel the U.S.'s economic recovery so far.
As we closed out November, we had the start of the holiday shopping season, an event that benefited several RMPIA constituents, including Amazon (AMZN) , Google (GOOGL) , Costco Wholesale (COST) , Starbucks, Mastercard and PayPal (PYPL) , as shoppers flocked online instead of to brick & mortar stores. With efforts to contain the spread of the virus expanding, the probability is high that shopping modality will be the big winner this year, pulling those shares and others higher.
While we cheer that development, investor focus will likely return to Washington as Congress returns to tackle funding the U.S. government and attempting to hash out a coronavirus relief package. Senate Majority Leader Mitch McConnell says he wants Congress to pass a stimulus package before the end of the year and several Democratic senators have signaled they want the bill to extend $600 per week in unemployment benefits -- a sign that Democrats might be willing to settle for a smaller stimulus package than what they had pushed for. With a tight calendar before the House set to adjourn for the year on Dec. 10, and the Senate on Dec. 18, we have to wait and see what gets accomplished. At the same time, the UK and EU have entered the "last leg" of Brexit negotiations and the latest move to exclude China listed equities in the U.S. could complicate existing U.S.-China trade relations. We could very well see a volatile finish to the year, but as we've said previously, RMPIA has been constructed to play out on several long-term structural changes -- we don't see that changing in the coming months.
(COST, GOOGL, AMZN, JPM, SBUX, MA and CVS are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
