Tag: Article

“America’s Small Stocks Are Leading the Market’s Charge” – The Wall Street Journal published this noteworthy article on 12/13/2020. Here are our key takeaways:

1. Small businesses and our economy = Small-cap stocks tend to do well in a recovering economy. The promise of COVID-19 vaccines has driven expectations for an improved economy and resuscitated industries that have suffered significantly in 2020.
   
   
2. A record month = The Russell 2000 Index, comprised of small businesses, just recorded its best month ever in November. And it has continued to perform well in December.

• According to the article, “The Russell 2000’s gain for the year surpassed that of the S&P 500 on Tuesday for the first time in 2020, according to Dow Jones Market Data.”

3. Attractive stock prices = Even with this record performance, the overall prices of small-cap stocks are reasonable – especially when compared to their large-cap counterparts.

Is it time to give small-cap stocks a fresh look? Discover Fenimore’s small-cap strategy and what makes us different.

Lessons Learned

Our lessons learned in 2020 would take up volumes, but there is an axiom that was strongly confirmed: The stock market is not the economy.

• Because the market is a discounting mechanism, there is often a disconnect between the performance of stocks and the current economic environment. In 2020, that disconnect became a gaping chasm with the market reaching several new highs despite GDP and employment figures that rivaled the Great Depression.

Our Outlook

• Though the initial rollout of the approved vaccines is moving slower than expected, increased immunization and a second stimulus package should support, if not accelerate, a return to more normal economic activity.
• Even more, some industries may experience catch-up demand that could lead to periods of over earning that would be dangerous to extrapolate.