US Economy: Signals flashing green (mostly).

Consumer confidence has slowed, and lapsed government COVID benefits have taken a toll on personal income (-0.7 percent in October), while other US data has remained favorable. Official unemployment just fell to 6.9 percent, lower than predicted, despite greater labor force participation, while good manufacturing and real estate indicators indicate a healthy base.

US Stocks: Vaccine = double-digit gains.

Given the overall optimistic economic backdrop and news from Pfizer and Moderna of highly successful vaccination studies, US shares rose substantially in November, with small-cap businesses (+18%) leading the way. Value and cyclical equities performed well as well, with average gains in the large-cap energy sector topping 30%.

Foreign Stocks: End-in-sight lift.

Non-US shares did well, with developed market stocks rising over 16%. As in the United States, investors began to seek for value-oriented possibilities in nations that had been disproportionately impacted by the pandemic, with Italian and Spanish shares gaining by 27 percent and 30 percent, respectively. Another minor contributor was the devaluation of the US currency.

Fixed Income: With rates stable, credit rallies.

Treasury yields finished around where they started in November, indicating that fixed-income instruments are holding up nicely. A "blue sweep" by Democrats in the US elections did not occur, reducing the likelihood of large fiscal spending driving up borrowing prices. As credit spreads continued to narrow, high-yield bonds benefited from increased investor risk-taking.

Real Assets: Infrastructure comeback.

Infrastructure, which had lagged behind the overall equity markets in the recovery, benefited from attractive values, increased energy prices, and anticipation that hard-hit airport and toll-road operators will return to normalcy sooner. Despite recent excellent results, infrastructure remains a tempting investment with inflation protection.

Our Take

We are now in the final month of 2020, having spent the majority of the year seeking to prevent significant illness and otherwise live under the confines of COVID-19. If that wasn't enough, to say the year was defined by unhelpful politics and societal instability would be an understatement. With all of that uncertainty, it is remarkable to look back and assess the financial market's performance to date. In aggregate, equities have provided strong gains, with stocks both at home and overseas rising by double digits in many cases. Meanwhile, fixed-income investments have provided investors with pretty excellent returns. We are pleased to have steadily raised our stock positioning over the last several months after taking efforts to preserve portfolios in the early part of the year. As we flip the page to 2021, our outlook remains upbeat as we consider changes to boost portfolio risk-adjusted returns.

Are there any grounds to be cautious? Certainly. Politics is still a concern, although not as much as it was last fall: control of the Senate is still up in the air, and extra COVID-relief assistance is stuck in limbo. We feel that further federal aid is required, but any severe worsening in economic indicators will very certainly compel Congress' hand. Some measurements of equity valuation are likewise strained. However, with the conclusion of COVID's economic repercussions on the horizon, there are still tremendous prospects, especially in asset classes that appear to have performed quite well in 2020.