Stocks continued to advance in December with small capitalization stocks maintaining their outperformance over mid and large caps seen in the prior month. The positive response to FDA approvals of coronavirus vaccines was moderated by an uptick of Covid-19 cases and the discovery of a more transmissible strain of the virus in the UK. The other major headline was the passage of a $900 billion fiscal stimulus bill that was signed into law at the end of the month. Economic news was mixed with manufacturing and services indexes continuing to show expansion, but at a lower than estimated rate. Retail sales for November were lower. While housing starts rose, sales of existing and new home sales declined. Investors favored growth and earnings momentum stocks in December. Earnings surprise, earnings trend, projected growth rate and earnings momentum were the top performing factors for the month. Price momentum was also in favor as stocks with price gains over the past year, 6-month, and 1-month periods performed well on average. High quality, large cap stocks underperformed during the month. This underperformance was also seen in the relatively weaker factor performance of high dividend yield and dividend growth. Although the advance in stocks was not as broadly seen across industries as in November, all but a handful of the groups we track had positive average price gains for the month. Some of the notable top performing groups were coal, misc. metals & mining, aluminum, and cement. Food and beverage stocks underperformed with dairy products, distilling, confectionery, meat packing and packaged food appearing at the bottom of the performance list.
Value of the Market
Source: Ford Equity Research