Nov. Rally In Biotech With Small Caps Taking Off

November Rally in Biotech and Other Sectors Broadening

  • Small caps took off, including XBI up 12%, IWM up 16.5% (11.2% YTD).
  • Healthcare lagging a bit, with the XLV up only 3.35% vs. SPY up 7.5% (12.6% YTD).
  • Re-opening trade movers: XLI up 14.75% at $88.11;  XLE up 34.54% at $38.91.

The market pivoted upwards in November as investors looked ahead to 2021 with expectations that COVID-19 vaccines would temper the pandemic. Vaccine stock leaders took off again with BioNTech (BNTX) and Moderna (MRNA) up 30% in one week at new highs. The small cap speculation shows up in the XBI, which kept pace with the Russell 2000 (IWM).

This November rally in the face of soaring COVID-19 cases raises concerns about what’s left for 2021. A sector shift toward “value and re-opening” stocks left technology stocks behind this week. However, both the NASDAQ (QQQ) -- which was up 40.4% YTD -- and XLK are near 2020 tops. The market, due to momentum and ample liquidity, has bet on an economic recovery this week as energy, financials, and materials led the way.

We developed this ETF-based Healthcare Model Portfolio about a month ago. It shows the impact of small caps in biotech and the recent lagging of healthcare stocks.

PORTFOLIO              
Stock/ETF Ticker Price 10/25 Weight P 11/13 P 11/27 %Perf 1 mo.  
iShares NAZ Bio IBB 136 25 141.06 143.22 2.27  
iShares Russell 2k IWM 163 10 173.51 184.37 16.56  
Merck MRK 80 10 81.09 79.86 2.4  
United Health UNH 330 25 355.67 337.94 5.44  
SPDR S&P Bio XBI 117 5 125.04 131.46 11.95  
Healthcare SPDR XLV 108 25 112.12 109.44 3.35

Disclosure: None.

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