Wednesday, November 25, 2020 Headlines

1. Global markets pull back after record run

2. Spain and Italy own November returns

3. Holiday sales expected to climb 3.6% this year

4. The real deal behind the Dow hitting 30,000

5. 2020's annualized returns are off the charts

Source: Getty Images

[Programming Note: We are going to take the rest of the week off for the Thanksgiving holiday, so there will be no Express on Thursday, although we'll send you a Black Friday special to end the week. Have a safe and happy holiday if you are celebrating, and thanks for spending part of your day with us. We are so grateful for our readers. Deb & Caleb]

Markets Today

Global equity markets are mixed to slightly lower as investors digest yesterday's record-breaking run that took the Dow beyond 30,000 for the first time in history. The S&P 500 and the Russell 2000 also cruised to record highs, as investors remain ebullient about vaccine developments and a robust recovery.

U.S. economic growth, however, is slowing, and coronavirus cases are surging, but investors are looking beyond that as they have for the past several weeks. We'll hear more about the economic speed-bumps when we get a basket of economic reports later this morning on U.S. consumer sentiment, spending, Q'3 GDP estimates, and weekly unemployment claims.

While the U.S equity markets are getting all the attention because of the flashy numbers, there's something cooking in Europe. Spain and Italy, the former epicenters of the pandemic last Spring, are seeing major market gains in November that make you wonder if you've had too much Rioja or Chianti.

We'll take both bottles, please.

Chart courtesy YCharts

PODCAST ALERT! The Investopedia Express

On this week's show:

Sallie Krawcheck, CEO of Ellevest, on the She-cession, and how to fix it before it's too late, and what you need to know about market breadth as you position your portfolio for the end of the year.

Headlines

The National Retail Federation forecast U.S. holiday sales during November and December will increase between 3.6 percent and 5.2 percent over 2019 to a total between $755.3 billion and $766.7 billion. The numbers, which exclude automobile dealers, gasoline stations and restaurants, compare with a 4 percent increase to $729.1 billion last year and an average holiday sales increase of 3.5 percent over the past five years.
President-elect Joe Biden’s Treasury secretary will need Congress to approve re-use of $455 billion in funds that the Trump administration is taking back from Federal Reserve and other pandemic lending programs, the Treasury said this week. Biden is expected to name former Federal Reserve chair Janet Yellen as his Treasury secretary. If confirmed, Yellen will be the first woman to hold the job since the department was created in 1789.
Shares of The Gap are gapping down 11% in pre-market trading after the company reported earnings that fell short of expectations. Higher spending on marketing offset sales gains at Old Navy and Athleta, while the company’s namesake brand and Banana Republic reported double-digit declines.
J.Crew changed its CEO for the third time in a year as Jan Singer, who took over as CEO in February, was replaced Tuesday by Libby Wadle, a longtime J.Crew executive. J.Crew filed for bankruptcy protection in May, and emerged in September with a deal that cut its debt and handed ownership to a group of lenders, led by New York hedge fund Anchorage Capital Group LLC.
U.S. home prices surged to 6-year high in September, according to the Case-Shiller index. Home prices in 20 large cities rose at a 6.6% yearly pace in October, according to the index. That’s up from 5.3% in the prior month. The biggest increases took place in Phoenix, Seattle and San Diego. The smallest were in New York and Dallas.
The U.S. government plans to initially roll out 6.4 million doses of a COVID-19 vaccine next month, and is confident in meeting its goal of distributing about 40 million doses by the end of the year, federal health officials said Tuesday. Two leading vaccines, from Moderna and Pfizer/BioNTech have shown to be about 95% effective at protecting against the virus. Pfizer has asked U.S. regulators to grant an emergency use authorization while Moderna’s request should come in the coming weeks.

Images courtesy: Giphy

The Big Story

The Dow of Big Numbers

Investors, like sports fans, like large numbers. They help put things in neat packages that we can wrap our minds around, like this:

The Dow Jones Industrial Average (The Dow) hit 10,000 for the first time in March 1999, and touched 20,000 in January 2017. That's easy to understand

While the Dow crossing 30,000 is undeniably significant, let's remember what the Dow is, and what it is not.

What it Is...

The Dow is the symbolic stock market index that has been around for 124 years, and gets all the media attention. It contains 30 "blue chip" stocks, that used to be representative of the industrial economy that powered the U.S. in the 20th century.
The Dow Jones Industrial Average, when viewed in relation to the Dow Jones Transportation average, is still a pretty good indicator of bullish or bearish momentum across the broader market. It's what market technicians and investing historians refer to as Dow theory, created by Charles Dow, whose name, along wit Edward Jones, is still on the door.

What it's Not...

A great indicator of the overall stock market, and the influence of the mega-cap technology stocks that really move things around. Apple and Microsoft are Dow components, but Amazon, Alphabet and Facebook are not. A lot of investors hold those stocks. Since the Dow is price-weighted index, and not a market cap weighted index, it kind of misses the influence of the country's biggest companies.
A benchmark index. Very few investors, if any, benchmark their returns against the Dow. With only 30 components and those large gaps mentioned above, it's more symbolic than referential. You can buy index funds that track the Dow, and you can buy ETFs like DIA that do the same, if you want to treat it like a benchmark. but you'll be missing out on a lot action outside of the index.

It's Still Cool

At the risk of acting like turkeys this close to Thanksgiving, we still think it's cool that the Dow crossed this symbolic milestone. It's mind-blowing to think that it happened during this crazy year, but why not? Congrats, Charlie and Eddie!

Photo courtesy MOAF.org

The Big Number: 109.8%

That's the annualized return for the S&P 500 in 2020, far and away the largest on record. This new bull market for the S&P 500, which started in March after the indexes collapsed, has gained 62.1%. Although the average bull market has seen larger gains over time, the 2020 annualized return stands head and shoulders above the rest.

To be sure, this current bull started running after a 35% drop for the S&P 500 in late February to early March as the economic realities of the pandemic were starting to manifest. It was the fastest bear market in history, and the fastest bull market recovery ever.

Bonus Numbers

Yesterday, the S&P 500 made its 25th new high for the year (They come in clusters).
The S&P 500 is up more than 11% in November, making this the best November since 1928 (Try not to think about 1929).

Chart courtesy LPL Financial

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