November 2020 – A light at the end of the tunnel

This morning Pfizer and their German partner BioNTech requested emergency use authorization (EUA) from the Food and Drug Administration for their Coronavirus vaccine -reaffirming there is indeed a light at the end of the tunnel. The EUA approval process typically takes several weeks and we believe the approval will be granted within the second week of December.

According to information presented by Pfizer to the National Academy of Medicine this week, 25 million doses of the vaccine are ready to be distributed next month, 30 million in January and 35 million more in February and March. Right on the heels of Pfizer’s upcoming EUA approval, competitor Moderna is just weeks away from applying for EUA approval for their vaccine, followed up by AstraZeneca and Johnson and Johnson. If approved, Moderna will have an additional 25 million doses readily available to be disbursed in December as well. Therefore, an estimate 50 million doses will be available, which will vaccinate 25 million of our health care workers, essential workers, and individuals with underlying medical conditions. These two vaccines should be the beginning of the end to the pandemic.

As I write this, I can’t help but to think how challenging 2020 has been for us all -the market highs, the lows and everything in between -in addition to the emotional toll this pandemic has impressed on us. Despite this, you should pat yourself on the back because you stuck with your asset allocation, kept your emotions in check and stayed invested. Because of this, your portfolio is reaping the rewards.

So where do we go from here? First and foremost, continue to stay invested and look to add to your investment portfolio on any short-term market dips while being mindful of maintaining a personal 6-month cash buffer on the sidelines. As political uncertainty begins to clear, having a known vaccine distribution timeline, Investor optimism will continue to increase, and we believe the focus will soon shift from Covid-19 new case count back to the fundamentals of corporate earnings.

As I have mentioned before, corporate earnings (fundamentals) are the true driver of long-term stock market gains. Last month, a large majority of the companies that make up the S&P 500 Index reported 3rd quarter earnings, and many chose to give forward revenue guidance. The percentage of companies beating earnings expectations stands at 84%, tied for the highest percentage since 2008. The percentage of companies beating revenue estimates was 77%, which is one percentage point off the record. These results are outstanding and show a true “boots on the ground” reflection of how strong and resilient the U.S. economy really is. Forward revenue guidance was surprisingly upbeat, and we believe the cost efficiencies companies have gained during the pandemic will bear fruit once the pandemic is over, leading to increased revenue beats once the economy is fully reopened.

In addition to the underlying strength of corporate America, we expect another $1.5 Trillion-dollar fiscal stimulus package to be approved shortly after inauguration (late January/early February) in tandem with continued emergency monetary accommodation by the Federal Reserve, our 2021 year-end S&P 500 Index target is 4300-4600 or roughly 17% higher than where we are today.

As I have mentioned before in previous notes, economic and market recoveries take time, gains are not linear and as long-term investors we have time on our side. Yes, there will be market hiccups along the way and we acknowledge this. We are confident in our long-term outlook but stand ready to make the tactical adjustments as needed.

We wish you a great Friday evening, an enjoyable weekend and a great Thanksgiving next week!

As always, please reach out to us with any questions or comments you may have regarding your specific situation.

Jaran Day Chief Investment Officer
Griffin Dalrymple, CFP®, Chief Strategy Officer