SFM Observer - November 2020
Issued: December 3, 2020
The Dow closed the month of November at 29,638 for a dramatic increase of 3,137 points or 11.8%. This historic rally in the market follows a choppy period just prior to the presidential election. In addition to the big rally, this month the Dow hit a new milestone, reaching 30,000 late in November. With news of multiple vaccines showing strong efficacy, the stock market is looking to the end of the pandemic and the epicenter stocks (travel, tourism and retail) have reacted sharply. The political parties are back to negotiating on a new stimulus package and there is now a chance a bill will pass before year end. These are all positives for the investment markets.
Some interesting events from the month just passed:
• Friendly’s restaurant chain has filed for bankruptcy as the impact of the virus continues to hammer the restaurant industry. Friendly’s operates over 100 outlets in the Northeast and was founded in 1935. Many of the restaurants will continue to operate under new ownership by a private equity firm. Friendly’s built a strong reputation based on ice cream and burgers in a family setting.
• GM is recovering strongly since the pandemic closed down their factories last spring. The company reported a $4 billion profit in the third quarter as Americans scooped up trucks and SUV’s over the summer. Fortunately, the company was able to restart their supply lines and meet most of the unexpected demand.
• Airbnb, the popular home sharing company is set to go public this month. For a business in the beleaguered travel industry, Airbnb found a way to turn a profit in the third quarter. The IPO is expected to be well received by the investment markets. Airbnb benefited from the widespread avoidance of hotels as people sought out “safe” vacations.
• Amazon is attempting to break into the pharmacy business by starting a division to fill prescriptions and send them direct to consumers through their vast delivery system. The system will feature two day delivery and plans to speed this up to same day delivery in the future. Nearly 4 billion prescriptions are filled each year in the U.S. making this is a big market opportunity for Amazon.
• Many Fortune 500 companies halted their dividends during the economic shutdown this year as a way to conserve cash amid the huge uncertainties presented by Covid. Now that the economic impact is largely known and many companies have adapted to the new environment, dividends are likely to be reinstated within the next 6 months. This is welcome news to investors that need income from their portfolios due to the ultra-low interest rates being offered in the bond market and bank deposit world.
• Existing home sales reached a 14 year high this quarter as we reached 6.8 million home sales on an annualized basis. People leaving urban areas and very low mortgage rates have combined to create a vibrant housing market. This is unusual historically due to the high levels of unemployment. Unemployment typically suppresses home sales.
Thank you for reading this issue of the SFM OBSERVER. Wishing you the best over the holidays.