Weekly Snapshot November 23rd, 2020
Market Review: Week Ending 11/20/2020
After two weeks of strong gains where many indices reached new highs and the Dow Jones nearly reached 30,000, domestic stocks paused last week as the S&P 500 Index dropped 0.7%, closing at 3557.1 Though Moderna announced the results of a trial that will soon lead to a second covid-19 vaccine, stocks couldn’t overcome surging virus cases and hospitalizations (which spiked 50% in the past two weeks) and signs of lost momentum in the economy following reports on October’s Retail Sales and Weekly Unemployment Claims that both showed slowdowns from previous reports. This is to be expected as several states have adopted restrictions in an attempt to slow the spread of the virus. Treasury’s decision to allow several emergency Federal Reserve lending programs to expire on December 31st, possibly contributed to the slight pullback, though those facilities were largely symbolic, acting mainly as backstops as few of the funds were actually lent to states and businesses. The S&P 500 was led last week by sectors expected to benefit from “reopening” and a return to normalcy (Energy +5.8% and Consumer Cyclicals +2.6%) while more defensive sectors trailed the overall Index (Healthcare -2.5% and Consumer Staples -1.4%), seemingly at odds with a move towards risk-aversion in the bond market, as the 10-year Treasury Bond fell 8bps, ending the week at 0.83%.2 The recent rotation into value also paused last week as returns for the Russell 1000 Value and Growth Indexes were roughly similar while the run for Small Cap stocks continued as the Russell 2000 Index rose 2.4%.2 This week’s holiday-shortened week features The Conference Board’s November consumer confidence index and October’s Personal Spending and Income.3 Both will be monitored for further signs of a slowdown where we’ll be watching to see if talk of a “double-dip” surfaces.
STOCKS IN THE NEWS
- Home Depot (HD)/WalMart (WMT) – These retailers (Both held in Fundamentum’s Global Individual Equity portfolio) reported Q3 results last week. Both traded off slightly after the reports, though both had outstanding results. HD reported revenues that surpassed analyst forecasts by 5.4% with a+24% gain in same-store sales which blew away the consensus forecast. HD is a clear winner during these work/learn/stay-at home times, reporting a 10% increase in transactions and a 13% increase in the size of the average ticket. Margins were slightly below forecast due to higher Covid-related costs. This, along with the stock’s strong advance in 2020 (+25.8% YTD) likely contributed to the 2.7% decline last week. WMT also reported beats on sales and EPS as same-store sales rose 6.4% (ecommerce sales surged 79%) with better-than-expected margins driving a 15.5% increase in EPS. WMT was down 0.2% last week, and sells at a high multiple of 26x forward earnings estimates, after rising 28.1% this year.2
As always, we appreciate your confidence in our team.
Fundamentum Investment Committee
Paul Danes, CFA® – Investment Committee
Trevor Forbes – Investment Committee
Robert Armagno – Investment Committee
Matt Dunn, CFA® – OSJ Supervisor
Sources:
- Wall Street Journal, 11/13/20
- FactSet, 11/12/20
- Barron’s 11/13/20
Investment advice offered through Fundamentum LLC a registered investment advisor. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no assurance that the investment objective of any investment strategy will be attained. Investing involves risk including loss of principal. Past performance is no guarantee of future performance. All indices are unmanaged and may not be invested into directly.
