The dazzling stock market of November 2020

Oh November! A few November market notes:

  • Small capitalization stock indexes had their best month ever (since the Russell 2000 began in 1979).
  • Value stocks had their best month ever. (since the Russell 1000 Value was created in 2000)
  • The gap favoring value over growth was the widest in 20 years.
  • Equities worldwide posted their largest gains since 1988.
  • Big tech got hammered relative to small caps, underperforming by over 12% in a month.

Keep in mind, this is a one-month period, which doesn't mean a lot, except that it's important not to miss one-month periods like this as an investor. To see graphs of this data take a look at this Bloomberg article.1

Even more interesting is that the value of asset diversification showed up. It pretty much drove a parade down main street.


You may be wondering, what is going on here?

Many restaurants and in-person venues closed, economies in partial lock-down, Covid raging, schools on life support, and the stock parade marches upward?

Remember, these things impact the market:

  • Markets look forward, and they price themselves based on the future. The market is pricing itself, arguably, where it thinks the U.S. will be next summer. With American and worldwide personal savings at high levels, people ready to explode from their houses, and success of a vaccine program looking like a high probability, the market thinks the economy is going to rip in 2021.
  • The government is signaling that it is going to print and distribute more money. Lots of money for free! (What could possibly go wrong?) Markets love the printing press, as a portion of that printing ends up in their coffers. Politicians have learned to love it too - it's like Washington should be renamed Gutenberg.
  • Everything in investing is relative to the risk-free rate, and the risk free rate bar is so low you'd have to try to trip on it. This is important. As investors perceive low returns in the bond market, they move capital elsewhere. Stocks look more attractive if their competitors for capital appear weak.

Even perma-bear Nobel laureate Robert Shiller argues here that stock prices may not be high. Which may be the case. Or, based on Shiller's reversal alone, one could hypothesize the opposite.

Dan Cunningham


1 Data is from Bloomberg: It's Been Amazing: November's Record Moves in Charts 11/30/20
2 Small capitalization reference above is Russell 2000, Value stocks are Russell 1000 Value. One Day In July tends to use similar but not exactly these indexes. See Bloomberg source above for details on performance sources.
3 Big tech reference is: Amazon, Facebook, Apple, Microsoft, and Alphabet.
4 St Louis Fed - Personal Savings Rate

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