Noember Market Update

By Ryan Gilmer, CFA, CMT Chief Investment Officer

December 1, 2020

We hope you are doing well. Here is a recap of market performance for the month of November, and year-to-date:

It’s been a tremendous month for stock returns. US small cap, international, and US large cap stocks have all increased by double digits. Bonds, while much less volatile, are also positive. For calendar year 2020, the S&P 500 remains the leader, but US small cap has closed the gap significantly.

This year has been anything but normal. Over the years, we’ve shown this Morningstar chart to clients many times. It shows what “normal” investment returns have looked like over very long periods of time:

In this case, large stocks have averaged about 10% per year. In any given year, however, markets almost never have returns around this level. In other words, abnormal performance is normal. Consider this chart from JPMorgan, which shows the annual, calendar-year returns in gray, along with the maximum loss in red:

Since 1980, the S&P 500 has had “normal” returns, between 8-12%, only 4 times. (This chart considers the price return of the index only, it does not include dividends.) Over the same timeframe, returns have been negative 8 years. The market has returned 20% or more 13 times!

As investors, we have to be prepared for anything. Most years, markets return something outside of normal expectations. So far in 2020, the S&P 500 is up 13% — maybe this is turning out to be a pretty normal year after all?

We hope you had a wonderful Thanksgiving and we wish you the best this holiday season!

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