Weekly Snapshot November 2, 2020

Market Review: Week Ending 10/30/2020

Covid-19’s third wave, fears of a contested election, and priced-for-perfection technology stocks were too much for US stocks last week as the S&P 500 Index fell 5.6% to 3269.1 This was the Index’s worst week since March and closed October with the second consecutive month of losses, dropping 2.8%.1 With the US reporting a record 99k Covid cases on Friday and with news of lockdowns in Britain and Western Europe, not even good economic reports and strong earnings were enough to sustain the Index, which is now down 8.9% from their September high and up only 1.2% in 2020.2 It was reported that the economy grew 33.1% y/y in Q3, beating forecasts of 31%. This represents the biggest expansion ever, rebounding from a historic 31.4% drop in Q2. Consumer spending was the main driver, while housing-related spending also surged. Still, GDP is still 3.5% below pre-pandemic levels and consumption of services remains far below previous levels.4 Regarding earnings, though many of the mega-cap Tech leaders reported earnings that were strong, they were not perfect and given their high valuations, profit-taking occurred. In the aggregate, earnings continue to be good. 60% of S&P 500 companies have now reported Q3 earnings, with 81% beating analysts estimates, lifting y/y EPS expectations to a decline of 12%, 10% better than what was predicted at the start of the reporting season.3 Not even Treasury Bonds witnessed the usual flight-to-safety last week, as 10-year bond yields rose slightly, closing at 0.87%, continuing the recent rise in longer-term rates.1 Many view this positively, as it can be seen as a sign of a more healthy economy. We would remind investors to “be careful what you wish for,” as higher long-term rates could also be a signal of building inflationary pressures. Also, at some point, higher long-rates will be detrimental in the valuation of the longer-duration equities, (growth stocks), this year’s market leaders. Finally, building inflation pressures could also cause the Federal Reserve to change its stance on monetary policy, which we view as a large factor in the market’s rally from March.


  • Apple (APPL) – Apple’s inline quarter regarding sales and EPS was seen as a disappointment (shares fell 5.6% last week) given slowing sales in China, a sluggish start to the recently introduced 5G iPhone 12 sales and another quarter where management did not give forward guidance. Work/learn from home tailwinds continue to power iPad and Mac sales higher, and Apple’s Wearables and Services beat expectations and continue to take market share. They have contributed to the 49% gain in the stock YTD as Apple continues to be well-positioned for long-term investors.3

  • Amazon (AMZN) – AMZN reported a stellar Q3 report, showing a huge beat on revenues that grew 37% y/y and EPS which exceeded expectations by nearly 70%. The stock fell 5.5% last week on cautious guidance for Q4 operating income based on expectations of $4b of coronavirus costs, double what they spent in Q3. Amazon continues to post industry-leading top-line growth in digital advertising and in their cloud segment, and is riding the momentum of massive positive revisions (NTM EPS have risen nearly 20% in the past 90 days), which has driven the stock’s 64% rise in 2020.3

  • Facebook (FB) – Strong advertising sales led 22% revenue growth (8% better than expectations) and EPS beat expectations by 43%, yet FB shares fell 7.6% last week on concerns over growing regulatory pressure and slowing daily average users in the US, their largest market. FB continues to take market share in digital advertising and now has over 10m digital advertising clients, up 10% y/y.3 FB shares have risen 28% in 2020 and sells at 26x forward EPS, among the lowest PE ratios of the mega-cap Technology stocks.3


  • November 3rd Elections – All eyes are on the elections this week, where both the Executive and Legislative branches have the potential to flip Deomcratic. While long-term stock market returns are remarkably similar whether a Republican or a Democrat sits in the White House, change typically unnerves investors and leads to short-term volatility (both positive and negative). Should the election be contested, in either direction, we would expect more than the usual post-election volatility. Investors continue to expect an agreement on additional fiscal stimulus after the election, though the timing could vary based on the election’s outcome. Investors expect the possibility of a “Democratic Sweep” would result in a larger stimulus than the $2T plan that was discussed prior to the election, though they also worry about the longer-term potential for higher taxes on both the corporate sector and higher-income individuals.

As always, we appreciate your confidence in our team.

Fundamentum Investment Committee
Paul Danes, CFA® – Investment Committee
Trevor Forbes – Investment Committee
Matt Dunn, CFA® – OSJ Supervisor


  1. Wall Street Journal, 10/31/20
  2. Morningstar Direct, 10/31/20
  3. FactSet, 10/30/20
  4. Barron’s 10/31/20

    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.