Stocks powered higher in November with smaller capitalization stocks leading the way. Indexes representing small caps outpaced the mid and large caps for the month. The news of effectiveness of coronavirus vaccines was the primary driver of the market advance. Gains were also helped by some strong economic news and U.S. election results that were viewed as positive for the market. The ISM manufacturing index for October indicated expansion that exceeded forecasts. The services index also showed expansion for October, albeit below the forecasted level. Retail sales increased slightly, and the housing market continued to show strength. Amidst the positive outlook, an uptick in Covid-19 cases and potential resulting lockdowns produced some mid-month declines. Investors continued to favor value stocks in November. Stocks selection factors such as price/sales ratio, p/e ratio, price/cash flow and price/book value were among the top performers for the month. In addition, small and midcap and lower quality stocks continued outperformance over larger cap, high quality stocks. Likewise, growth and momentum stocks had a follow-on month of underperformance as seen by 1-year eps growth rate, sales momentum, and value/momentum factors appearing near the bottom of the performance listing. The breadth of the rally produced positive average price gains for all the industry groups that we track. Notable among the better performing groups were those in the oil sector, publishing, broadcasting and auto related. Among these were banks, savings & loans, copper, aluminum and steel. Among the relatively weaker performers for the month were food producers, utilities, trucking and railroads.
Value of the Market
Source: Ford Equity Research