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Data Points
- Pfizer and BioNtech announced their COVID-19 vaccine was 90% effective in recent clinical trials
- The Russell 1000 Value index returned 5.7% on the week compared to -1.3% for the Russell 1000 Growth Index
- The Federal Reserve pledged to maintain monthly asset purchases at $120 billion
Top Three Market Headlines
Pfizer Announces Favorable COVID-19 Vaccine Test Results: Pfizer and its partner BioNTech announced last Monday that their COVID-19 vaccine proved to be 90% effective in the latest round of clinical trials. The result was much better than many anticipated and highlighted the remarkable progress made by U.S. pharmaceutical companies, with support from the U.S. government, to stop the global spread of the pandemic. Both Pfizer and BioNTech expect to ask the FDA for emergency authorization in the coming weeks, which dramatically increases the likelihood of a vaccine distribution plan by year end.
Value and Small Cap Stocks Surge on Reopening Hopes: Pfizer’s announcement sparked a frenzied week of trading in the stock market. The S&P 500 index returned 2.2% for the week, but this result belied forceful moves beneath the surface. Chiefly, investors rotated from a “pandemic trade” favoring companies that have thrived during Covid-19, including technology and internet retailers, to a “reopening trade” focused on firms seen benefiting most from a return to pre-pandemic levels of consumer and business behavior, such as cyclicals and small caps. As a result, the tech-heavy Nasdaq index fell 0.5% on the week, while the Russell 2000 small cap index gained 6.1%. In addition, the Russell 1000 Value index (+5.7%) enjoyed its largest weekly outperformance versus the Russell 1000 Growth index (-1.3%) in at least five years.
Federal Reserve Maintains Monetary Stimulus Measures: The Federal Reserve kept monetary policy unchanged at its early November meeting, choosing to continue purchasing Treasury and mortgage-backed securities at a pace of $120 billion a month while holding the federal-funds rate near zero. The Fed noted that economic activity and employment have continued to recover “but remain well below their levels at the beginning of the year.” Fed Chair Jerome Powell stated that “a full economic recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities,” and reiterated his call for greater fiscal support to help drive greater economic activity.