COVID-19 continues to be on the forefront of financial markets. Recent headlines from the front lines against COVID have shown incredible progress. Pfizer, in coordination with BioNTech, was first to announce a COVID vaccine on Monday, Nov. 9th. Moderna followed suit by announcing their vaccine on Monday, Nov. 16th. These announcements offer the prospect that our normal lives may be around the corner.

The impact on the financial markets has been nothing but positive. Both Mondays witnessed a jump in stock prices across the board. Most notable was the broadening of the market with a rotation to small and value stocks. Of particular note were the beaten down industries; such as restaurants, hotels, airlines and cruise lines to name a few. Event and experience industries are looking forward to the day they can move beyond this dreadful period.

The two pharmaceutical companies have indicated dosing could begin as soon as December with enough vaccine to inoculate a large portion of the US population by mid-2021. The announcements with accompanying declarations have given hope that normalcy can return before too long. Not only will this buoy lifestyles, it will reinforce companies’ earnings as well.

Speaking of earnings, the third quarter has seen some incredible results. As can be expected, results from a year ago are down. Yet the markets do not react to best and worst. They react to better or worse… more specifically to better or worse relative to expectations or estimates.

According to Factset1,1a financial data and software company, of the 92% of S&P 500 companies reporting results, 84% have reported earnings surprises (surprises are reported earnings above estimates). If the high percentage of surprises holds, third quarter 2020 will tie the all-time high since Factset has kept earnings surprise records. To add credence to the third quarter, companies are reporting earnings that are 19.4% above estimates, second largest ever. Taken together, the breadth and magnitude of the earnings surprises are of record proportions.

Clearly, the third quarter was the “yin” of the second quarter’s shut-down “yang.” The fourth quarter is likely to be a bit more challenging. However, this is likely near-term noise as COVID vaccines come online. The introduction of the vaccines has the potential to springboard the economy and stocks higher.

Have a Happy Thanksgiving!


Alejandro M. Jerez

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