November QuickPoll Survey: Views on the Market Rally, Fiscal Stimulus and Vaccine

Market Rally Dynamics

• The current equity rally is broader in scope than previous gains, driven significantly by cyclical stocks sensitive to economic activity rather than just the five dominant tech stocks that comprised three-quarters of year-to-date S&P performance.
• Thematic analysis indicates a sharp shift from "stay-at-home" sectors to "go-outside" economic drivers, suggesting operators expect a return to normal life.
• Bond yields are rising alongside equities, reflecting increased growth expectations and the potential for central banks to eventually move away from the zero lower bound.

Survey Findings: Pillars of Optimism

• A Marquee Quick Poll identifies three primary drivers supporting the current market performance:
  • Fiscal Spending: Expectations remain high for a $1 trillion to $1.5 trillion fiscal package in 2021.
    • 45% of respondents (the modal outcome) anticipate a $1 trillion package, aligning closer to Senate proposals.
    • 29% of respondents anticipate a $1.5 trillion package, aligning closer to House Democratic proposals.
  • Vaccine Developments: Participants have integrated a faster-than-expected timeline for vaccine approval and distribution into their 2021 expectations.
    • 61% of survey participants expect the first vaccine to receive approval in 2020.
  • Central Bank Support: Investors expect supportive monetary policy to persist longer than the immediate pandemic period.

Political and Structural Drivers

• Market participants appear more confident regarding fiscal spending despite a potential split Congress, as the reduction of political uncertainty to two clear paths simplifies forecasting for 2021.
• The "binary nature" of fiscal agreement has been mitigated by the combination of central bank support and positive vaccine developments, lowering the threshold for markets to feel vindicated.
• The high efficacy rates released in clinical trials surprised operators, effectively shortening the timeline to a return to normalcy and shifting the narrative from counting time since the pandemic start to counting toward its end.
• Remaining challenges to the vaccination rollout include manufacturing capacity, distribution logistics, and winter weather conditions in the northern hemisphere.

Market Risks and Forward-Looking Sentiment

• While concerns exist regarding a divergence between market performance and recent economic fundamentals, this is viewed as a normal characteristic of forward-looking asset pricing versus backward-looking economic data.
• Survey positioning reflects strong confidence in future growth, with 40% of participants selecting developed market equities as their favored long position.
• Conversely, 29% of participants selected developed market bonds as their favored short position, signaling a conviction that growth prospects in 2021 and beyond will improve significantly.