Unexpectedly Intriguing!
December 14, 2020

Keeping with 2020's theme of stock price volatility, investors appear to have shifted their forward-looking focus once again in a new Lévy flight event.

The latest Lévy flight was much less dramatic than the previous one that took place in the second week of November 2020, when investors shifted their forward time horizon outward from 2020-Q4 to 2021-Q3. That event was prompted by the news of Pfizer's successful COVID-19 vaccine development, which was quickly reinforced by Moderna's and AstraZeneca's COVID successful vaccine development announcements.

The latest shift in the forward-looking focus of investors came as the Trump administration successfully pushed the U.S. Food and Drug Administration to approve Pfizer's vaccine for emergency use, which came faster than had previously been expected.

The FDA's approval accelerated the timetable for the deployment of an effective vaccine in the United States, which coincides with the new Lévy flight event as the latest update of the alternative futures chart indicates investors shifted their focus from 2021-Q3 inward toward 2021-Q2.

Alternative Futures - S&P 500 - 2020Q4 - Standard Model (m=+1.5 from 22 September 2020) - Snapshot on 11 Dec 2020

This change pulled stock prices downward, as the expectations for the change in the year-over-year growth rate of the S&P 500's dividends in 2021-Q2 are less positive than they are for 2021-Q3. We characterize this change as "less dramatic" than the previous Lévy flight event because the difference between 2021-Q2 and 2021-Q3 is smaller than the difference between 2020-Q4 and 2021-Q3.

While the FDA's COVID-19 vaccine approval was the biggest news story of the week, other stuff happened to influence investor expectations, where we've captured the main market moving headlines of the week in the list below.

Monday, 7 December 2020
Tuesday, 8 December 2020
Wednesday, 9 December 2020
Thursday, 10 December 2020
Friday, 11 December 2020

The listing of notable headlines is shorter than previous weeks because we've omitted many items related to the impending Brexit event for the United Kingdom and the European Union, which contributed a lot of noise in the week's news stream.

But if you want more, Barry Ritholtz outlines the positives and negatives he found in the week's economics and markets news over at The Big Picture.

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