What a difference a month makes

Mike Loewengart, Managing Director of Investment Strategy

E*TRADE Capital Management


November brought the sweet taste of clarity. After months of political angst, the election finally appears to be in the rearview mirror, and with a transition formally underway, a picture of the next four years in Washington has begun to take shape. 

While virus cases continue to surge, several weeks of positive news on the vaccine front have given investors a potential light at the end of the pandemic tunnel. Heading into the final month of a tumultuous year, the economic outlook for 2021 seems bright. 

Here’s a quick rundown of what happened in the markets last month and what’s on the horizon.

US equities

It was a solid month all around for stocks: The S&P 500®, Dow, and Nasdaq Composite reached new record highs as the rally that started with big tech in April broadened to include less-loved areas of the market. The Dow broke above 30,000 points for the first time—a psychologically significant milestone that marked an impressive 60%-plus climb from the March lows. 

But it was small caps that really stole the show, as the Russell 2000 rose 18%, notching its best month ever.1 Small caps (smaller, US-based companies) often outperform during periods of economic expansion, so the prospect of a highly effective vaccine that helps reopen the economy may create favorable conditions for them.

November 2020 US equity performance

FactSet Research Systems

From a sector perspective, there was some changing of the guard. Energy, financials, and industrials—highly cyclical sectors of the market—were the month’s biggest gainers as investors embraced the “reopening trade.” 

November 2020 sector performance

FactSet Research Systems

International equities

International equities also had a banner month, with developed markets surging more than 15% and emerging markets rising 9%. Hope for a vaccine may have been particularly welcome news for developed markets, as many European countries have struggled with another wave of outbreaks and subsequent lockdowns. Also, with President-elect Joe Biden set to assume office in 2021, there is the potential for a return to more global-friendly policies, which may present opportunity for non-US stocks. 

November 2020 international equity performance

FactSet Research Systems

Fixed income

Bonds were slightly stronger in November. Interest rates ended little changed, despite the benchmark 10-year Treasury rising to nearly 1% mid-month—its highest level since March. High-yield corporates (+4.0%) led the major fixed-income sectors. Municipals outperformed taxable bonds, but remain behind on a year-to-date basis.

US Treasury yield curve, November 30, 2020

FactSet Research Systems

Looking ahead

The next few months may be among the most uncertain as markets balance winter virus woes with vaccine developments—but the long-term view looks clearer. Here are a few points to keep in mind: 

  • Political clarity: President-elect Biden has begun appointing a number of seasoned professionals to his leadership team, helping solidify the structure of the next US administration. Of course, as with any presidential transition, especially from one party to the other, there may be some bumps in the road.
  • Vaccine advances: With multiple highly effective vaccine candidates up for approval, the possibility of returning to pre-pandemic life no longer seems like a figment of the imagination.
  • Cautious optimism: Our colleagues at Morgan Stanley2 forecast that while 2021 will be nothing if not bullish, near-time volatility can certainly rear its ugly head. Still, the market outlook may be increasingly dominated by positive catalysts

Thanks for reading. We’ll talk to you again next month.

  1. Bloomberg, “‘It’s Been Amazing’: November’s Record Moves in Charts,” 11/30/20, https://www.bloomberg.com/news/articles/2020-11-30/-it-s-been-amazing-november-s-record-breaking-moves-in-charts
  2. E*TRADE Financial, LLC is a business of Morgan Stanley. 
Mike Loewengart
Managing Director, Investment Strategy, E*TRADE Capital Management, LLC

Mike Loewengart is the Managing Director of Investment Strategy for E*TRADE Capital Management, LLC. Mike is responsible for the asset allocation and investment vehicle selections used in E*TRADE’s advisory platforms. Prior to joining E*TRADE in 2007, Mike was the Director of Investment Management for a large multinational asset management company, where he oversaw corporate pension plan assets. Early in his career, Mike was a research analyst focusing on investment manager due diligence for the consulting divisions of several high-profile investment firms. Mike holds series 7, 24, and 66 designations, as well as the Chartered Alternative Investment Analyst (CAIA) designation. He is a graduate of Middlebury College with a degree in economics.

Andrew Cohen, CFA
Senior Director, Investment Strategy, E*TRADE Capital Management, LLC

Andrew Cohen is the Senior Director of Investment Strategy for E*TRADE Capital Management, LLC. Prior to joining E*TRADE, Andrew was the Director of Investments and Operations for a large Registered Investment Adviser, where his responsibilities included investment manager research, asset allocation, and portfolio construction. Previously, he was a Senior Research Analyst and Team Leader for a leading wealth management platform. He is a CFA® charterholder and a member of both the New York Society of Security Analysts and CFA Institute. He is a graduate of Virginia Tech with a BS in finance.

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