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Investment Commentary

St. Nick or Santa Rally?

By Brian Andrew | Johnson Financial Group • December 04, 2020

4 minute read time


Most of 2020’s stock rally has been driven by just a few stocks. Given that a handful of stocks now make up a large portion of the index, many investors have been wondering when the rest of the market would participate in the rally. Chief Investment Officer, Brian Andrew, shares insight on this question, with a holiday twist.

Many people have a St. Nick tradition of hanging stockings and giving each other small gifts (for those unaware, St. Nick’s is Sunday, December 6!). When I was young, these little gifts created some excitement about the holiday season and provided us an opportunity to give something homemade to our parents. Then, when Santa arrived later in the month, the gifts were usually bigger.

December is generally known as a positive month for stock returns. In fact, almost three-quarters of the time that’s the case. The median return for December is 1.48%. However, after a month like November, maybe it’s more a St. Nick than a Santa kind of month. When the market has returned more than 10% one month (as it did in November), the average return in the following month is -0.48%.

Stocking Stuffers

November was a blockbuster month for stocks around the world. The small-company stock index had the best month it has ever had. The broader-based and large-company index, the Standard & Poor’s 500, was also up. So, while December is usually a positive month for stocks, it may be less likely to produce big returns.

Foreign markets also produced strong returns for the month of November. The MSCI All-Country World Index excluding the U.S. was up 13% during November and emerging markets returned 9%.

Digging Deeper

If we reach further down into the stocking however, we find that November was a really interesting month for markets. Most of 2020’s stock rally has been driven by just a few stocks. We’ve written about this in the past. Given that a handful of stocks now make up a large portion of the index, many investors have been wondering when the rest of the market would participate in the rally.

I mentioned small company stocks earlier. In November the Russell 3000 Index of small company stocks returned 12% while the S&P 500 Index was up “only” 10.7%. In addition, sectors of the stock market that had been underperforming for much of the year began to do better as well. The unloved value part of the market was up 16.4%, using the value iShare ETF VLUE. While momentum, which has been driving markets, was up only 10.6%, using iShare ETF MTUM.

Much of the November rally can be attributed to two things: the election taking place and the announcement of vaccine trial results.

While the election outcome remains procedurally unfinished, the market’s perception of an outcome and a lack of national mandate for a dramatic policy shift provided a boost to asset prices.

However, and more importantly, the first announcement of phase 3 trial results by Pfizer and BioNTech (and then Moderna) that their vaccines were more than 90% effective in trials boosted share prices. These results were better than anticipated and suggested that a lower number of people getting the vaccine would create broader immunity.

Markets have been hoping that the economic recovery would remain on track and that those areas of the economy most impacted by the virus slow downs could recover in 2021. This news, coupled with the distribution planning for millions of vaccinations, gave investors some comfort that the economic recovery in 2021 would materialize earlier.

The fact that we have seen the less-loved parts of the equity market performing better suggests that investors are buying into the economic recovery as small-company stocks generally do better when that occurs.

Of course, the recovery will be uneven as we are still months away from national distribution of vaccines that will reach hundreds of millions. However, much like reaching into the bottom of your stocking and finding one more gift on St. Nick’s, markets provided a boost to investor sentiment in November.


  1. Pfizer Phase 3 Trial Announcement


Brian Andrew

Brian Andrew

Chief Investment Officer | Johnson Financial Group

As Chief Investment Officer, Brian Andrew leads Johnson Financial Group's investment strategy to provide consistent, actionable investment solutions for our clients.


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