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A New Reality?

There are still significant unknowns hanging over the market, with the most prominent including the fate of an additional stimulus package and the outcome of the two run-off elections in Georgia which will determine the makeup of the U.S. Senate. There are questions, too, about the long-term efficacy of the vaccines and their safety for different subsets of the population. Still, there is no question that the ground has shifted over the last few weeks. As such, investors need to start looking forward to a time when COVID-19 becomes a more manageable disease and its economic impact diminishes.

One likely beneficiary of this is commercial real estate, and we saw the anticipation of that in the performance of the IQ U.S. Real Estate Small Cap ETF (ROOF), which jumped on the vaccine news. Another is banks, where a steepening yield curve, should it materialize, would be positive for earnings. Airlines and travel-related industries have been pounded by the lockdowns and are likely to do better as Americans start moving around again.

To repeat a familiar caution: a few days of trading does not make a trend. In particular, it’s early to conclude that the rumblings of a major rotation in favor of value and away from growth indicate a lasting move. For the moment, the surge in COVID-19 cases and new lockdowns going into the winter are negating some of the positive vaccine news. But barring a major reversal in the approval process, the vaccines will move into wider distribution, infections will eventually start to decline, and COVID-19 considerations will no longer dominate investment strategies. This will be a welcome change most importantly on a public health level, but for the markets as well.

Originally published by New York Life, 11/25/20


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“New York Life Investments” is both a service mark, and the common trade name, of certain investment advisors affiliated with New York Life Insurance Company. IndexIQ® is an indirect wholly owned subsidiary of New York Life Investment Management Holdings LLC and serves as the advisor to the IndexIQ ETFs. ALPS Distributors, Inc. (ALPS) is the principal underwriter of the ETFs. NYLIFE Distributors LLC is a distributor of the ETFs. NYLIFE Distributors LLC is located at 30 Hudson Street, Jersey City, NJ 07302. ALPS Distributors, Inc. is not affiliated with NYLIFE Distributors LLC. NYLIFE Distributors LLC is a Member FINRA/SIPC.

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