November 15, 2020
Weekly Market Outlook
By Keith Schneider
The US presidential election looks like it’s pretty much over (except for the law suits) with Biden the victor along with the stock market.
At this critical juncture, major thematic shifts are underway with a historic move from red hot growth stocks to more value stocks participating to mid and small caps taking leadership.
For the week, Small Caps were up +6% while the Nasdaq 100 (QQQ) was down -1.25%, making this spread in weekly performance the most extreme in 75 years.
Lurking in the background are two key longer-term indicators that are at historic overbought extremes; Margin Debt and The Buffet indicator (GDP verses Stock Market valuations).
However, both of these long-term value measures have been overbought for quite some time. Hence, these metrics are not very good for timing.
The highlights of this week’s market action are the following:
As we wrap up the earnings season and move into a seasonally bullish time of the year, the trend to watch is the Small Caps or Russell 2000 ETF (IWM).
Small Caps typically lead markets out of recessions, and this week’s all-time trading and closing high by Grandpa Russell (IWM) is following that pattern by marking the end of a 3-year bear market in this index.
This under appreciated segment of the market is moving on up and likely to become the talk of the town in 2021.