Market Review - November 2020
With positive news of a COVID vaccine and clarity on the election outcome, stocks soared globally for the month of November. While US equities gained 11%, it was small-cap stocks in the US that stole the show. The Russell 2000 index rose 18% on news that a highly effective vaccine could help reopen the broader economy, reversing a long-term trend of underperformance relative to large-cap stocks. International equities also had stellar month, with developed markets surging 15.5% and emerging markets rising 9.3%.
All sectors in the US posted positive returns for the month of November. Energy, financials and industrials—economically sensitive sectors that have been the laggards to date—were the month’s biggest gainers.
Fixed income markets posted positive, but subdued returns, relative to stocks. Emerging market bonds and international bonds outperformed US bonds on hopes of a more global- friendly policy under the new incoming administration and a continued weaker dollar. US bonds gained 0.98%. Lower quality bonds like high-yield corporates in the US led the major fixed income sectors and gained 4.0%.
Gold took a breather in November and lost -5.6%, while US REITs and commodities saw positive returns of 9.2% and 3.5% respectively on hopes of a broadening economic recovery.
Relative to a globally balanced (60/40) equity/bond index, allocations to higher risk investments like global equities, US REITs and commodities helped drive positive returns, while diversifying risk into investments, like global bonds and gold, hurt for the month.
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