Year in Review in 7 Charts: This Major Market Rotation Keeps Gaining Momentum

Lou Basenese

Tuesday, December 22, 2020

If 2020 taught us anything, it’s to expect the unexpected.

With that in mind, I’m abandoning my normal discipline of holding off until Friday to share an important chart or two to convey a timely investment trend.

Instead, I’ll be doing it in every column through the end of year.

And while it’s always true that a little perspective never hurts, rest assured — this isn’t merely an exercise in looking at what’s worked in the past.

Sure, looking back is a good start. But you expect and deserve more from me.

That’s why, each day, I’ll be hand-selecting a chart that showcases one specific investment trend — a trend I fully expect to keep charging higher (or lower) in 2021.

In other words, look for these columns to be just as diagnostic as they are prognostic. And that means they’ll contain actionable insights you can start profiting from immediately.

Who said nothing good in life is free? That’s certainly not the case in the Trend Trader Daily Nation!

So without further ado, let’s get to it…

Go Small to Win Big

A few months ago, I told you to shun mega-cap stocks in favor of their much smaller brethren. Why?

Because numerous tailwinds were combining to create a perfect storm for small-cap outperformance. From surging retail investment to rising geopolitical risks to reawakened Mergers & Acquisitions.

I don’t want to say I told you so… but I told you so!

Case in point: The small-cap Russell 2000 Index just capped seven straight weeks of rallying. And the Russell Microcap index is similarly surging.

In fact, since the market bottom earlier this year, micro-caps and small-caps have rallied a staggering 101% and 94%, respectively. That’s more than 30 full percentage points better than the performance of the large-cap S&P 500 Index.

And as you can see in the chart below, the outperformance really kicked into high gear in recent months.

Pro Tip: Don’t Invest in Indexes and Averages

The thing is, these figures are merely the averages for small- and micro-caps.

For investors that wisely focus on individual securities rather than indexing, the outperformance has been even greater.

And I’m happy to say that readers of my premium Micro-Cap Advantage research service know about this outperformance firsthand.

We’ve closed out gains this year as high as 949%, with an average return of 254%.

As for our open positions, we’re currently sitting on five triple-digit unrealized gains of 135%, 173%, 200%, 231%, and 366%. With plenty more room for all these micro-caps to run.

Bottom line: Small- and micro-caps are rallying right on cue. You see, November, December, and January are typically the three-best performing months for them going all the way back to 1978.

Given the strength of the recent rally, I’m convinced we’re in store for a big and extended period of outperformance for smaller stocks.

Don’t miss out!

You can hit the “easy button” and capture the next phase of profits by scooping up shares of the closed-end fund I shared with you about a month ago — the Royce Value Trust (RVT).

Or you can go for “homerun” returns by taking advantage of a unique offer we put together for a select group of our readers.

Click here to find out all the details »

Ahead of the tape,

Tags: 2020 trends