November 2020 in Review

Daniel Zeigler, CFP, CMFC, Portfolio Manager

Hi everyone, this is Dan Zeigler, Portfolio Manager with Midland Wealth Management. 

I wanted to spend a few minutes giving a quick update on the markets for the month of November. And wow, what a month it has been for the stock market! 

The Dow Jones Industrial Average had its best performing month since 1987, up 11.88%, and the Russell 2000, which is small-cap companies, had its best month ever on record, up nearly 18.40% for the month of November. 

The S&P 500 is having a great year, as well, with a return of a little over 14% for the year. 

Driving this historic gain can be traced back to November 9th, when Pfizer reported their Phase 3 COVID-19 vaccine had an overall effective rate over 94%. Several other companies have reported similar results and now have filed for FDA approval, which may be approved in December with vaccines to follow shortly after. 

After this news, both value companies (such as Financials and Energy and small-cap companies, which is the Russell 2000) shot higher, as investors positioned their investments for a sharp resurging economy in mid-2021.   

The economy continues to recover and consumers are certainly changing their habits, as online spending on Black Friday surged 21.6% to a new record as consumers rang up $9.1 billion worth of purchases on the web. Unfortunately, as you would expect, brick and mortar stores saw their traffic fall by 51.1% compared to last year. 

So what can we expect going forward for December and 2021? 

Unfortunately, we may have seen the Santa Claus rally a little early this year, thanks to the stellar equity market returns in November. 

Typically, the month of December for stocks are positive 70% of the time with an average return of 1.5%. However, when you get a November up over 5%, those gains could be more muted. 

After this historic month of returns in November, it is perfectly normal for investors to take some profit, which could lead to a healthy short-term correction. 

The market seems to be pricing in a lot of good news, but there is still reason to be cautious as the market continues to recover.   
We are still waiting for election results in Georgia, which will decide the Senate in January. Markets are still anticipating some type of stimulus plan to help small businesses and millions of people that are out of employment from the pandemic.   

Stock valuations do appear stretched, with the S&P 500 currently trading around 22x next year’s earnings, with the 25-year average close to 16.5x earnings. 

We will continue to keep everyone updated and stay tuned for our quarterly investment newsletter at the end of December. 

Midland Wealth Management is a trade name used by Midland States Bank, its subsidiary Midland Trust Company and its affiliate Midland Financial Advisors, an SEC registered investment advisory firm. Investments are not insured by the FDIC or any other government agency, are not deposits or obligations of the bank, are not guaranteed by the bank or any federal government agency, and are subject to risks, including the possible loss of principal.