My Thoughts On The Post-Election Rally

In case you’ve been glued to election returns, the market received a nice post-election jolt last week. After climbing 367 points on Wednesday, the Dow gained 542 on Thursday, tacked on more than 800 Monday, and then added another 262 yesterday.

That’s almost an average year’s worth of gains crammed into five trading days.

Voters may be split, but the reaction from investors was decisive. The market is comforted by a divided government – you know, checks and balances. While Democrats will take control of the White House next year, Republicans are on track to hold the Senate and pick up multiple seats in the House.

Now, I don’t want to spend a lot of time covering the investment ramifications of the election today.

There will be plenty of time for that. And we’ll discuss it more thoroughly in the weeks to come.

But first things first, how about that rally we saw Monday?

A Major Win In The Vaccine Race

The Pfizer (NYSE: PFE) camp released some highly encouraging data for its Covid-19 vaccine candidate. This potential game-changer favors neither red nor blue, but everyone.

This isn’t really a huge surprise. I have been chronicling Pfizer’s progress in recent months. The last time we checked, only 32 trial participants had been infected out of a large pool of more than 30,000 (and many of those likely took the placebo). Now, we are being told that the vaccine is more than 90% effective.

Needless to say, the market is cheering – particularly in sectors that have been most hobbled by the pandemic. While the broad S&P 500 shot up 4% into record-high territory, there were widespread gains of 10% or more in economically sensitive groups such as travel and entertainment.

Delta Airlines (NYSE: DAL) stock rallied 17% on Monday. Carnival Corp (NYSE: CCL) gained 39%. And AMC Entertainment (NYSE: AMC) surged 51%.

On the flip side, stocks that benefited handsomely from the stay-at-home economy are now giving up some gains. Think Zoom Video (NYSE: ZM) and exercise equipment maker Peloton (Nasdaq: PTON), along with defensive plays such as precious metals.

Our High-Yield Investing portfolio is taking full advantage of this rally. Of our 40 holdings, 38 delivered gains on Monday. The lone exceptions simply gave back a little after solid advances in recent months.

Everything else is green.

The energy sector would be an obvious beneficiary of a potential vaccine. More cars on the road and more planes in the sky would strengthen sluggish oil demand. That’s why ConocoPhillips (NYSE: COP) and BP (NYSE: BP) bounced 19% and 21%, respectively, in two days.

This would also paint a more optimistic scenario for pipelines and other midstream infrastructure. Enterprise Products Partners (NYSE: EPD) has risen about 8%, while Kinder Morgan (NYSE: KMI) has climbed 10%.

But the biggest winners from a potential vaccine are the industries that have been most crippled by the pandemic and ongoing social distancing measures. Perhaps none are breathing a bigger sigh of relief than theatre owners and operators. Cinemark (NYSE: CNK), for example, jumped 45%. In a single session.

Closing Thoughts

Make no mistake, we are not out of the Covid woods just yet. But Pfizer (which itself has enjoyed a nice pop) may be clearing a trail.

In the meantime, I’ll keep repeating what I’ve been saying throughout this year… Don’t let the major market averages fool you. There are still plenty of solid stocks that have only recovered a portion of what they lost during the Covid selloff.

Of course, some of them are not worth touching right now. But there are some real gems to be found, too.

If you’re an income investor, this is great news. My High-Yield Investing readers and I have already scooped up high yields from shares of solid companies during this ordeal. Despite the recent rally, many of them are still “buys”. And there will no doubt be a few more to come in the months ahead.

To learn more about High-Yield Investing and join thousands of like-minded income investors in the search for opportunities you won’t hear about anywhere else, go here now.