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📑 Research Notes for 2021-01-25
This week, we look small company outperformance, stock returns under Trump, and the current reversal of major trends.
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Small Companies are on Fire.
It’s hard to believe, but over the last year, microcap stocks have done twice as well as large-cap stocks. Given that small businesses are still in a world of pain, generally speaking, the market must be discounting a combination of continued fiscal stimulus and a reopening of the economy.
The Dow Jones under Donald Trump and Other Presidents.
(The Reformed Broker)
The Dow Jones Industrial Average (Dow) gained approximately 56% during Trump’s four years in office, which comes out to an annualized return of an impressive 11.8%. President Trump’s annualized Dow return of 11.8% was the best for any Republican president since President Calvin Coolidge in the Roaring Twenties, but this was still below the annualized returns of Presidents Bill Clinton and Barack Obama.
When Secular Trends Reverse.
The most significant investing trends over the last 10 years can be summarized as follows…
Large Caps over Small Caps.
US over International.
Growth over Value.
Tech over Everything.
Long Duration over Short Duration (Yields Falling, Curve Flattening).
Stocks over Commodities.
When Covid-19 first hit the US last February and March, all of these pre-existing trends accelerated. But then, with no advance warning, a strange thing started happening. One by one, these trends began to reverse course.
Curated by Joseph Lu, CFA®
Joseph has over a decade of experience as an investment professional, primarily in quantitative analysis and portfolio management roles. He is the founder and managing director of Conscious Capital Advisors and a CFA® Charterholder. The CFA charter is a globally respected, graduate-level investment credential by the CFA Institute, a global association of more than 90,000 investment professionals working in over 133 countries.
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