M2 BARRON’S December 7, 2020
more likely they will come to a deal, some
analysts predicted.
“Under the circumstances, it is hard to
be a seller of any risk asset as long as there
is a good possibility of getting a deal done,”
wrote Mizuho Securities analyst Robert
Yawger. “You could actually make the argu-
ment that bad news is actually now good
news because it increases the probability of
getting a deal done.”
There’s some cynicism in that viewpoint,
but the market is clearly buying it. Stocks
dependent on economic growth have been
leading the rally, and oil is jumping. U.S.-
traded oil briefly hit nine-month highs on
Friday, and stocks of producers likeCono-
coPhillips(ticker: COP) rose more than 5%.
In general, cyclicals and value stocks
have outperformed growth stocks since
early November.
The S&P 500 returned 11% inNovember.
Value stocks, as measured by low price-to-
book values, have rallied 32% in the past
month, according to BMO Capital Markets.
By contrast, stocks with the fastest five-year
earnings-per-share growth rose 10.5%.
A broad basket of value stocks is still
down 9% this year, and analysts think that
those stocks have considerable room to run
as the overall economy improves.
“While the pandemic and the excessively
binary investment decisions, and lack of
process and discipline that came along with
it, are unlikely to fade in the coming months,
we remain optimistic heading into 2021 as
the economy and society slowly transition
back to normal,” wrote BMO Chief Invest-
ment Strategist Brian Belski. He expects the
S&P 500 to gain another 15% next year after
ending this year at 3650.
And yet it’s worth questioning the rally
too. Mark Stoeckle, CEO and portfolio man-
ager at Adams Funds, tellsBarron’sthat
some of the big growth names that have
lagged now look like smarter bets than the
“reopening” names. Yes, cruise stocks may
eventually prove their worth, but does it
really make sense to buy a company like
Royal Caribbean Group(RCL) after a 47%
rise since the start ofNovember?
Stoeckle thinks reopening “euphoria”
will fade. Delivering a vaccine to billions of
people is no simple matter, and the market
could buckle on any changes in the time-
line. “We do not think this is going to be a
straight line,” he says. Stoeckle is gaining a
newfound appreciation for stocks likeMi-
crosoft(MSFT), which is down 8% from
its highs earlier this year.
“I think that many of these reopening
stocks have gotten ahead of themselves,” he
says. “I think that the market has punished
some of the big tech stocks too much.”
The market punishing big tech stocks?
There’s a first time for everything.
Banking on Biden
Bank investors have had plenty of problems
to fret about lately, but at least the incoming
Biden administration isn’t one of them.
After a week of speculation, President-
elect Joe Biden officially nominated Janet
Yellen, former chair of the Federal Reserve,
to be his Treasury secretary. For bank in-
vestors, having a familiar face was a wel-
come relief. Many on Wall Street worried
that Sen. Elizabeth Warren (D., Mass.), or
another adversary of the financial industry,
would win the position. In Yellen, the
Street sees a known quantity.
“Some of the early [Biden] appointments
are less disruptive than feared,” Chris
McGratty, head of U.S. bank research at
Keefe, Bruyette & Woods, tellsBarron’s. Be-
fore the election, KBW had recommended
Goldman Sachs Group(GS),Bank of New
York Mellon(BK),Fifth Third Bancorp
(FITB), andTruist Financial(TFC), as-
suming Biden won and Republicans held the
Senate; the latter will be determined in
Georgia’s runoff election for two U.S. Senate
seats next month. The firm stands by those
picks. Even if the Democrats win both
seats—which wouldgive them an effective
Vital Signs
Friday's Week's Week's
Close Change % Chg.DJ Industrials 30218.26 +307.89 +1.03DJ Transportation 12742.08 +180.65 +1.44DJ Utilities 856.13 -17.05 -1.95DJ 65 Stocks 10067.98 +70.15 +0.70DJ US Market 930.38 +15.62 +1.71NYSE Comp. 14417.33 +218.83 +1.54NYSE Amer Comp. 2334.65 +42.01 +1.83S&P 500 3699.12 +60.77 +1.67S&P MidCap 2244.94 +39.02 +1.77S&P SmallCap 1085.44 +25.77 +2.43Nasdaq 12464.23 +258.39 +2.12Value Line (arith.) 7784.21 +201.03 +2.65Russell 2000 1892.45 +37.18 +2.00DJ US TSM Float 38454.30 +654.94 +1.73Last Week Week EarlierNYSEAdvances 2,363 2,555Declines 846 631Unchanged 49 60New Highs 490 465New Lows 20 28Av Daily Vol (mil) 5,405.6 4,789.2Dollar(Finex spot index) 90.86 91.79T-Bond(CBT nearby futures) 171-210 173-280Crude Oil(NYM light sweet crude) 46.26 45.53Inflation KR-CRB(Futures Price Index) 159.89 160.97Gold(CMX nearby futures) 1835.90 1781.90Starting at $0 Commissions
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