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The Bottom Line

● The S&P 500 and Dow were up for the second week in a row, but it was small cap stocks that topped the leader board for the second straight week. After delivering + 6.9% last week, the Russell 2000 small cap index added another +6.1% this week.
● Promising news of a potential COVID‐19 vaccine helped Value oriented stocks trounce Growth stocks. But with cases surging both in the U.S. and abroad, many are wondering if this is just another Value head‐fake.
● The yield on the benchmark 10‐year U.S. Treasury ended the week at 0.90, its highest weekly close since the week of March 13 when it closed at 0.96.

Stocks pull a small (cap) plot twist

The October NFIB Small Business Optimism Index matched September, 104.0, which is its best level since February. One concern is that uncertainty about future business conditions hit its highest point since 2016, reflecting worry about the election and the pandemic. Job openings are rising back toward their pre‐pandemic levels. The September JOLTS report showed that the number of job openings edged up +1.3% to 6.4 million, the fourth gain in the past five months. October Consumer Price Index (CPI) inflationheldsteady from September’s level. Both CPI and core CPI fell on a year‐over‐year basis. A big question will be whether the vaccine news this week will spur inflation or whether the resurgence in COVID‐19 cases will suppress it. The Producer Price Index (PPI) increased +0.3%, its sixth gain in a row. Food and energy prices led the increase. Year‐over‐year, PPI was up +0.5%. The preliminary November Reuters/U. of Michigan Consumer Sentiment Index fell ‐4.8 points to 77, a 3‐month low in the survey. It was the first read on sentiment since President‐elect Joe Biden’s victory.

Digits & Did You Knows

SLOW MOTION ‐ The “velocity of money” in the U.S. was 1.104 in the 2nd quarter 2020, the lowest ever recorded. The highest “velocity of money” level was 2.198 in the 3rd quarter 1997. “Velocity of money” measures the rate that money is exchanged in our economy for goods and services. It has steadily fallen for the last 14 years as more Americans have paid off debt or saved cash instead of spending money (source: Federal Reserve Bank of St. Louis, BTN Research).
EVERY DOG DOW HAS ITS DAY WEEK ‐ The Dow Jones Industrial Average beat the technology‐heavy Nasdaq by+4.6 percentage points this week, the largest weekly performance advantage since July 2002 (source: Bloomberg).

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Source: Bloomberg. Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange‐traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds may be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐YieldBond(iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 ValueETF);MidGrowth(iSharesRussell Mid‐CapGrowthETF);MidValue (iSharesRussell Mid‐Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4%Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.

Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a
Registered Investment Adviser. PCIA doing business as Prime Capital Wealth Management
(“PCWM”) and Qualified Plan Advisors (“QPA”).
© 2020 Prime Capital Investment Advisors, 6201 College Blvd., 7th Floor, Overland Park, KS 66211.

 

Chris Bouffard
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