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Read on for the four most-prominent trends we’re tracking from November 2020.
Run of Big Tech
Since the market’s lowest point in the early days of the pandemic, large information technology stocks have experienced a meteoric rise. The NYSE FANG+ index is up about 56 percent through the end of November, compared to the overall market, which is only up about 14 percent. Although the magnitude of outperformance is large, we have been in this position before. In the lead up to the dot com bubble, the Nasdaq Composite Index rose 86 percent, compared to the rest of the market, which only gained 5 percent.
Value Showing Signs of Life
It’s a gross understatement to say growth stocks have outperformed value stocks significantly in recent years. Year-to-date through 11/30, growth stocks (using Russell 3000 Growth Index as a proxy) outperformed value stocks (using Russell 3000 Value Index as a proxy) by over 3,300 basis points (+31.8 percent versus +1.2 percent).
However, the tide has shown signs of turning since 11/9 (“Pfizer Monday”), the day Pfizer announced its purportedly highly effective COVID-19 vaccine. That day alone, value stocks outperformed growth stocks by nearly 600 basis points (+4.3 percent versus -1.7percent). Between 11/9 and 11/30, a short period of three weeks, value stocks outperformed growth stocks by more than 670 basis points (+7.9 percent versus +1.2 percent).
One has to wonder: is this the turning point for value outperforming or another misdirection?
Read more on this topic from Frank Wei, CFA, CAIA, Vice President, Senior Investment Analyst with Envestnet | PMC, on investpmc.com/insights.1
Since Election Day, the Dow Jones Industrial Average Index (DJIA) has risen almost 7 percent. Although there has been continued litigation around the results, the markets have tuned out the noise as the DJIA crossed the 30,000 threshold in November for the first time. It seems that the market is optimistic about the prospect of a split government. As the final elections are certified, odds are the Democrats will control the Presidency and the House of Representatives, while the Republicans are likely to retain control of the Senate. Senate run-off elections in Georgia may be able to tilt the balance back towards the Democrats, but this remains an uphill battle.
The COVID-19 Vaccine
The global medical community’s response to the pandemic has been a bright spot in 2020. Although a vaccine might not be ready for mass delivery by the end of 2020, it seems like that could happen in early 2021. Although a number a companies have vaccines that could prove to be a panacea, informing the public and creating understanding may prove to be just as challenging.
A study by Franklin Templeton-Gallup Economics uncovered important findings about vaccination adoption. The study indicated that the best predictor for vaccine adoption is if someone took the flu vaccination the previous year. Timing of the vaccine is important as well; many would be reticent to take the vaccine if it came out this year as opposed to 2021. Although these are important factors when trying to determine vaccine adoption, the study also uncovered a fear that exists about returning to “normal” activities.2
If you’d like additional information about these themes or have questions, please contact PMC.Research@envestnet.com.
- Frank Wei, “Growth Or Value – That Is The Question,” InvestPMC.com, December 9, 2020.
- Stephanie Marken, “Roundup of Recent Gallup Data on Vaccines,” News.Galllup.com, November 13, 2020, https://news.gallup.com/opinion/gallup/324527/roundup-recent-gallup-data-vaccines.aspx.
The information, analysis and opinions expressed herein are for informational purposes only and do not necessarily reflect the views of Envestnet. These views reflect the judgment of the author as of the date of writing and are subject to change at any time without notice. Nothing contained in this piece is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type.
All macro-economic data obtained from Bloomberg.
PMC Global Macro Team