Market Commentary 11/30/2020

By: Matt Garrott

US large cap equity markets hit all-time highs in November as the Dow Jones Industrial Average crossed 30,000 for the first time.  These round numbers get easier to hit as the index values increase.  The Dow’s increase from 10,000 in March 1999 to 11,000 in May 1999 was a 10% move.  The increase from 29,000 in January 2020 to 30,000 in November 2020 was a move of 3.4%. 

Large Cap Growth stocks have dominated 2020, but we saw a bit of a rotation in November, as Small Caps, Value, and Developed International stocks outperformed.  The energy sector led the way with a whopping 28% return for the month, but perspective is in order as energy is still down 36.5% on the year. 

The average snowfall for December in Cleveland is 14 inches.  However, the last two Decembers only brought us 8 inches total.  On the first day of December for 2020, many Clevelanders saw a foot of snow or more.  Lyndhurst topped Cuyahoga county with 22 inches.  That is the story of averages.  We don’t get 14 inches of snow every December and that 14 inches isn’t distributed in half inch daily accumulations across the month. 

The S&P 500 has averaged a little over 10%/year over time and is up 14% year-to-date.  If you slept through 2020 and just woke up today, you may think the market has had a good, a little above average year.  However, you would have missed a storm that resulted in a 34% drawdown, a 65% rebound off the bottom, and some other short-term irrational behavior.  2020 has definitely not been an average year, but in order to realize those historically double digit average long-term returns in stocks, you need to be able to get out your shovels and live through some stormy weather along the way.