AS OF LATE
In our end of October newsletter to clients, we stated, "For the full year, stocks, in general, have barely shown any gains. Results? Less than 2% in growth for the S&P. " Then we followed that by stating, "Stocks have sort of been somewhat "range-bound" lately meaning they are moving up and down finding it hard to move higher above a certain range but also not breaking below a certain range either."
As we stated, stocks were looking for a way to trudge higher and it seems in November they certainly found the way higher! The month of November for 2020 was the best monthly returns for the stock market in almost 30 years and so stocks definitely made their jump. This is extraordinary in terms of the size of the move but the month of November in an election year is usually the strongest month of that year as our model references the data.
S&P 500 vs Government Bonds during November. For the S&P 500, it was the best single month in decades and now has the S&P above historical averages for the calendar year.
The interesting thing is so much of the strength in the leadership within the markets so far this year and one of the best performers of the year, gold/precious metals, began to falter in November. Capital Research exited our precious metals positions in the month of November.
The other leading element of the markets during all of 2020, the long-term U.S. Government Bond market, held its own in November and eked out a gain of just over 1%. While this pales in comparison to the major stock market indices in November, it was helpful to fixed income investors who have stayed on the more cautious/conservative end of the bond markets. This mild-mannered return in government bonds for November still leaves the U.S. Government Bond market up just shy of 20% and finally, the S&P 500 has pushed higher and it passed the 10% mark as stocks moved higher as November closed out. As the child of one client once said as they overheard me discussing bonds vs stocks, "Sounds like bonds rule and stocks drool!" That is true during certain periods of time for markets indeed!
Best asset classes over the last 10 years and the current year. Yes, stocks underperformed bonds by a wide margin this year.
("Past performance does not guarantee future result.......")
We also seem to have now possibly appearing a long-awaited (by many investors) rotation in the leadership within the stock market. The leadership in the market has long been led by large and ultra-large stocks, particularly of the growth variety versus the value stock variety. Growth stocks have lead the market higher for the past many years. That era of growth stocks leading the way higher appears to be potentially coming to a close. Value stocks seem to be taking on more strength and moving higher at a faster rate than we currently see in growth stocks. (See the graph below).
A big change in momentum from growth stocks to value stocks? The change is short-lived at this point, it could be the start of a much longer trend. Maybe.
Additionally, the size of companies which are leading the market right now is seen to have moved toward companies smaller in size, not minute by any stretch of the imagination, but smaller than their giant counterparts. Many people have been forecasting this turn or "rotation" in leadership for years, some going back more than a decade. It seems their thinking was actually based more on hope (hope is not a great investment philosophy) rather than what the data was actually saying. They wanted the data to say something it just wasn't. An aged saying from Wall Street is, "You have to invest in the market you have, not the market you want." Very true! Maybe their dreams are finally coming true or maybe not but for now, we follow the data our models give to us.
Are we also seeing another change in leadership with small company stocks taking the leadership away from large company stocks? It does appear that something is happening but will it last? Again, time and the data will tell!
So, while we are delighted with the surge higher in stocks during November (the best month in 3 decades), we are also processing the data daily for changes in what is driving the markets higher and whether (if) new leadership is coming into play during this current time. We are focused on not being predictive but are focused on daily analyzing what happened that day and how that relates to several time frames occurring before that day.
Stay tuned, and our desire is to keep you abreast of changes which do indeed happen in the near term and longer-term too.
Please let us know if you are interested in having an online appointment with us rather than doing a face-to-face meeting. We have been doing online meetings with clients long before Covid showed up. We do reviews, updates, or introductory meetings online if you would like for us too.
We remain watchful.
Ken Graves, Chief Investment Officer
Capital Research Advisors, LLC
Capital Research Advisors, LLC,
4185 B Silver Peak Parkway,
Suwanee, GA 30024
800 -767- 5364
All rights reserved
It is truly amazing to see rates just keep on dropping! It is a boon for homeowners to refinance right now and there may be some more juice left in the fruit for a bit more of a squeeze! I think they will likely keep tipping on down. If we were to see the 15-year mortgage rate start with a "1", while it would be astounding it would not totally shock me. No guarantees on that at all but............ it could happen!
They could go lower still.
Maybe some easy money.
1. Tax Credits Yet Unknown to You.
If you’re a startup or a new or small business or a founder, chances are you qualify for tax credits you are not claiming. There is a new company called MainStreet that audits your books and applies for tax credits on your behalf. The average amount they save companies that sign up is $75,000.
Hard to believe? There are countless examples on social media talking about how much this program has saved them on a yearly basis. On aggregate they have saved companies over millions in total. And soon they will be expanding from just a few tax credits to hundreds.
If you’re a founder or partner of a company with 5+ and up employees, look into it. Tax credits are awesome!
Cost to try this? Mainstreet takes a % of the credits they deliver for you.
2. Yield on Savings/Checking
One of the accounts I oversee has an upper level of service at a large bank due to the fact that they keep over $100,000 in the bank. That means their “status” gives them some perks like higher interest rates on cash. I was going over their bank statement for them and saw that their "status" gets them 0.02%! I told them of a basic internet search they could do and find rates 10X -20X higher.
Banks make money off the interest spread. They’re not going to voluntarily pay you more, so you need to be proactive about it. They prey on laziness and lack of inertia-the money with them is not in motion... out the door! Look around and it is easy to find much higher rates on money markets. It might take you 15 mins to fill out their application online but it is easy money!
3. Investing Your “Safe” Money
Yes, this one requires a bit of a change in thinking, so it might not be a fit for everyone.
Most people think cash is the safest investment, but if you include the effects of inflation, cash can easily have a large loss of purchasing power over time. Historically, if you invest, as opposed to banking it, part of your safe money, the combined results have the potential to be higher yield AND lower historical losses.
4. Shopping Rebates
If you buy things online, you sometimes will notice a box at checkout that lets you input a discount code. Instead of having to go and search for a discount code every time you buy something, you might consider using one of these two companies, Rakuten and BeFrugal. Rakuten has a browser add-on (extension) that finds the best rebate and automatically does it for you. Boom, it kind of works for you even if you forget it is working for you! The other is Befrugal and it is similar but is just not a browser add-on.
I’ve received checks from them 3 different times so far. It costs nothing to join and pays you with automatic discounts while you shop AND sends you their own rebate checks too!
5. Refunds for Fees
We all pay fees that we don’t necessarily have to pay (think credit card annual fees, etc). There are a few apps that will automatically request fee waivers or discounts. I can't say that I have used them a lot but here are a few you can get on board for free. Cushion and DoNotPay
6. Get a Raise
Did you ask for a raise this year? Why not? Most are too scared and people just don’t like rejection.
There are several ways to ask for a raise. What’s the worst that can happen, they just say no?! It costs you nothing to try.
7. Unclaimed Assets
You have likely heard about this one, but given that it has saved people millions of dollars so far, I need to encourage you to do it!
It is very simple, many people leave behind money, particularly when they move. Things like cable bills, dividends, trusts, insurance all go unclaimed and sit in the state government coffers. There are billions some claim waiting to be claimed, and the government is in no rush to find you and pay it out.
The good news is you can go to this website just like I did, Unclaimed.org, search your name, and apply to claim your cash. Don’t forget to search states where you used to live. I found $174 of mine once and found money my Dad had left in an old military savings account. One of our own clients had $116,000+ in an old investment account that was in an unclaimed status!
You can search your family, co-workers, a boss and present them with the info (might be a great time to ask for that raise). There are few things people like more than free money, except free money they get back from the government.