Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

As markets closed last Friday, the light at the end of the tunnel for the many walls of worries didn’t look any closer. However, over the weekend we did get some more transparency on the Presidential election as all of the major media outlets declared former Vice President Joe Biden as President-elect. While there will be continued legal maneuvering, markets have already moved on, posting the second best election week return going back to 1928. The S&P 500 gained 7.3% for the week even while some investors initially tried to take profits early Friday. "Tried" being the key word, as futures markets reversed after another strong employment report showed the unemployment rate declining to 6.9%.

As we noted last week in our Election Market Update, many investors were positioned very defensively heading into the Presidential election, and now have been trading back into risk as more transparency was being provided. Early Monday morning investors learned that one pharmaceutical company’s COVID-19 vaccine showed 90+% efficacy, causing domestic equity market futures to rise dramatically with the S&P 500 showing an implied open of +4.6%. If those gains hold through the day, that’s almost a 12% gain through six days! Early morning winners have been cyclicals such as energy, financials, and REITs as hope for an earlier reopening of the full economy increases. Additionally, earnings season for the third quarter is now tracking to be the second best “beat” in history, currently at +16%, which only trails last quarter’s record beat of 21%. While the markets are pricing in a lot of optimism (they’re still expecting another round of fiscal stimulus), it still makes sense to remain diversified as we’re not out of the woods yet. We still have 10 million unemployed workers to get employment back to where we were pre-COVID. Small businesses and municipalities continue to be strained, and winter is just beginning which may further mitigate some the actions that many small businesses have taken to remain in business, such as open air seating in parking lots. The COVID-19 storm hasn’t fully passed through yet, and now is not the time to get complacent. What is clear is that green shoots continue to sprout and the light at the end of the tunnel is getting a little bit brighter.

In the week ahead, investors will finally take a much deserved breather with CPI and PPI headlining the week’s release of economic data. Inflation has been much talked about after the Fed changed their policy to targeting an “average” of 2% inflation, rather than making 2% a fixed goal. September’s CPI release saw an increase of 0.2% to 1.4% for the last 12-months as consumers flocked to used cars and trucks.

Data deck for November 7–November 13