While We Were  Focusing On This...

This was happening: (record daily increases in Covid -19 cases)

and...

As well, we got a look at important Q4 data on the employment / unemployment front:

In the U.S., the Labor Department reported (yesterday) that employers added 638,000 jobs in October and the unemployment rate improved to 6.9%. However, there remains over 10 million jobs lost from pre-pandemic levels:

In Canada, Statistics Canada reported (yesterday) that there were 83,600 new jobs added in October and the unemployment rate fell to 8.9%. There were 635,000 fewer jobs than pre-pandemic levels:

Clearly, employment gains are slowing.

And behind the headlines, in Canada, long-term unemployment (looking for work for over 27 weeks) is accelerating:

Statistics Canada reported that it "increased by 79,000 (+36.2%) in September and a further 151,000 (+50.7%) in October... As of October, the long-term unemployed totaled 448,000, or one-quarter (24.6%) of all unemployed people."

"September and October increases in long-term unemployment are by far the sharpest recorded since comparable data became available in 1976".

With increasing Covid-19 cases and the potential for further lockdown and / or simply seeing consumers staying away from and /or postponing economic activity and employment growth stalling, the longer-term outlook becomes more uncertain.

If, as and when the de-coupled stock markets start to wake up to an economy that has a significantly longer time frame for recovery (and the likely not-so-positive impact on corporate earnings) and add in a U.S. political situation that may be more complex with a likely Democratic President and a Republican Senate (uncertain fiscal stimulus), then I would suspect that would leave stock prices vulnerable to the downside. 

Based on this, with current stock price valuations at expensive levels, the risk to the downside for stock prices is once again heightened. Patience will be required. Volatility will bring opportunity and we believe that more volatility is coming.