Tuesday's Market Minute: November's "I-Want-Out" Trade

Now that November has come to a close, the holidays and a much-needed break seem that much closer. Before fully diving into the final 23 trading days of 2020, however, take a look at where U.S. equities ended the month.

Despite the major indices, excluding the Nasdaq-100, closing Monday in the red, all four saw significant gains to their share prices. The S&P 500 gained 9%; the Dow Jones and Nasdaq both increased 10%; and the Russell 2000 grew a whopping 17%. A large part of these unseen-before November gains is due to the string of positive COVID-19 vaccine news we saw throughout the month. First, on Nov. 9, Pfizer Inc. PFE and BioNTech SE BNTX said their candidate was found to be more than 90% effective in preventing coronavirus. Then Moderna Inc MRNA and AstraZeneca plc AZN followed suit. Now, the first doses of the vaccine could be distributed as soon as next month.

Rather than the Work-From-Home trend that spurred stocks like Zoom Video Communications Inc ZM and Peloton Interactive Inc PTON to triple-digit percent gains, November saw a reversal that favored brick & mortar and travel. ZM grew a relatively paltry 6% versus Carnival Corp’s CCL nearly 50% monthly gain. There’s little surprise then that the energy sector saw the rebound it did. Both crude oil futures (/CL) and the S&P 500 Energy Sector ETF (XLE) ended the month up more than 20 percent. Additionally, the best-performing stocks in the SPX were all in the oil and gas space: OXY, DVN, APA, FANG.

Instead, November’s trading activity can be summarized as the I-Want-Out trend: out of the home office and back into (safe) normalcy. Though while vaccine optimism persists, there are no certainties, and with stocks at record highs, traders would be wise to go into December cautious. Hopeful, but cautious.

Photo by Roberto Júnior on Unsplash