07/06/2020
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Categories
Monthly Investment Update
Markets wrapped up the year on a positive note, as the S&P 500 gained 3.8 percent during December and closed the year up over 18%[1]. After declining nearly 34 percent in less than five weeks in the spring when the Covid-19 pandemic accelerated, the large cap US stock index spent the majority of the remainder of 2020 recovering. Global efforts to provide nearly frozen economies with significant fiscal stimulus and monetary policy support certainly played a major role in that recovery (see the Federal Reserve balance sheet expansion below).
Non-US equities rallied in December, as well. Developed international stocks were up 4.7% for the month (as represented by the MSCI EAFE index) and emerging markets stocks fared even better, up 7.4% (as represented by the MSCI EM index). The two indexes were up 7.8% and 18.3% for the year, respectively.
This past year was the first time in several calendar years that small cap US stocks managed to outpace their US large cap peers. The Russell 2000 index was up 8.7% in December, bringing its calendar year 2020 return to 20%.
The bond market (as represented by the Barclays Aggregate Bond index) was relatively flat in December. However, the index was up 7.5% for the year as high-quality core bonds provided a ballast for portfolios through volatility earlier in the year.
Much of the positivity being expressed in markets most recently is the result of the development and approval of multiple Covid-19 vaccines, with the hope that a return to normal is on the horizon in 2021. It is amazing when you consider that approximately one year after the disease emerged, multiple vaccines have been created and approved for use with the public.
The biggest vaccination rollout in history is now underway with more than 12 million people globally having received their first shot (more than 4 million of those are in the US)[2]. The Pfizer/BioNtech, Moderna, and AstraZeneca/Oxford vaccines have gotten most of the attention in the US and Europe, however, four other vaccines have been approved for public use in other countries according to Bloomberg.
While the heroic effort by healthcare workers to both save lives and bring a vaccine to the masses in record time should be applauded, many challenges related to our physical and economic well-being remain. For example, Covid-19 cases, hospitalizations, and deaths all remain near all-time highs in the US and only 1.3% of the population has received a vaccination thus far.
While we believe the road to recovery has begun, we also recognize that much of what has been lost – including lives and livelihoods – cannot easily be replaced. As such, we anticipate many bumps along the way. The distribution of multiple vaccines, several of which require two doses weeks apart, to billions of people across the world represents a logistical challenge of epic proportions. In addition, many industries, including brick-and mortar retail, airlines, hotels, and restaurants, and those that work for those companies will continue to struggle until the pandemic recedes.
Going forward, we continue to see opportunities in many of the industries and sectors that have not rebounded to the same degree as other parts of the market. We will look for opportunities to add to those asset classes in 2021, while being mindful of the potential volatility that can arise as we attempt to recover from the damage done by the Covid-19 pandemic.
Investors who remained focused on their long-term investment plans were rewarded in 2020 despite the pandemic-induced volatility of the spring. As always, we encourage clients to revisit financial plans and target allocations periodically. Circumstances change and your financial plan may need to change with them. Please do not hesitate to reach out if you would like to discuss your situation in greater detail.
Asset Class Returns
| Category | Representative Index | Dec. 2020 | YTD 2020 | Full Year 2019 |
|---|---|---|---|---|
| Global Equity | MSCI All-Country | 4.6% | 16.3% | 26.6% |
| US Large Cap Equity | S&P 500 | 3.8% | 18.4% | 31.5% |
| US Small Cap Equity | Russell 2000 | 8.7% | 20.0% | 25.5% |
| Foreign Developed Equity | MSCI EAFE | 4.7% | 7.8% | 22.0% |
| Emerging Market Equity | MSCI Emerging Markets | 7.4% | 18.3% | 18.4% |
| US High Yield Fixed Income | ICE BofAML High Yield | 1.9% | 6.2% | 14.4% |
| US Fixed Income | Barclays Aggregate Bond | 0.1% | 7.5% | 8.7% |
| Cash Equivalents | ICE BofAML 3 Mo Deposit | 0.0% | 0.5% | 2.2% |
Source: Morningstar (total returns shown gross of fees)
As of December 31, 2020
Prices & Interest Rates
| Representative Index | Dec. 31, 2020 | Year-End 2019 |
|---|---|---|
| S&P 500 | 3,756 | 3,231 |
| Dow Jones Industrial Avg. | 30,606 | 28,538 |
| NASDAQ | 12,888 | 8,973 |
| Crude Oil (US WTI) | $48.42 | $61.21 |
| Gold | $1,902 | $1,520 |
| US Dollar | 89.94 | 96.39 |
| 2 Year Treasury | 0.13% | 1.58% |
| 10 Year Treasury | 0.93% | 1.92% |
| 30 Year Treasury | 1.65% | 2.39% |
Source: Bloomberg, US Treasury (total returns shown gross of fees)
As of December 31, 2020
Past performance may not be representative of future results. All investments are subject to loss. Forecasts regarding the market or economy are subject to a wide range of possible outcomes. The views presented in this market update may prove to be inaccurate for a variety of factors. These views are as of the date listed above and are subject to change based on changes in fundamental economic or market-related data. Please contact your Financial Advisor in order to complete an updated risk assessment to ensure that your investment allocation is appropriate.
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Categories”}},{“type”:”list_item”,”source”:{“query”:{“name”:”categories.customCategories”,”arguments”:{“id”:0,”offset”:0,”limit”:10,”order”:”term_order”,”order_direction”:”ASC”}},”props”:{“content”:{“name”:”name”,”filters”:{“search”:””}},”link”:{“name”:”link”,”filters”:{“search”:””}}}}}],”name”:”Blog Category List”}]},{“name”:””,”type”:”column”,”props”:{“image_position”:”center-center”,”media_overlay_gradient”:””,”width_small”:”2-3″},”children”:[{“name”:””,”type”:”headline”,”props”:{“title_element”:”h1″,”item_maxwidth”:”large”,”content”:”Monthly Investment Update”},”source”:{“query”:{“name”:””},”props”:{}}},{“name”:””,”type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”
Markets wrapped up the year on a positive note, as the S&P 500 gained 3.8 percent during December and closed the year up over 18%[1].\u00a0 After declining nearly 34 percent in less than five weeks in the spring when the Covid-19 pandemic accelerated, the large cap US stock index spent the majority of the remainder of 2020 recovering.\u00a0 Global efforts to provide nearly frozen economies with significant fiscal stimulus and monetary policy support certainly played a major role in that recovery (see the Federal Reserve balance sheet expansion below).\u00a0″},”source”:{“query”:{“name”:””},”props”:{}}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/2021\/01\/The-Federal-Reserve-balance-sheet-January-2021-Monthly-Investment-Update.png”,”image_alt”:”A graph depicting the Federal Reserve balance sheet”}},{“name”:””,”type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”
Non-US equities rallied in December, as well.\u00a0 Developed international stocks were up 4.7% for the month (as represented by the MSCI EAFE index) and emerging markets stocks fared even better, up 7.4% (as represented by the MSCI EM index). The two indexes were up 7.8% and 18.3% for the year, respectively.\n
This past year was the first time in several calendar years that small cap US stocks managed to outpace their US large cap peers. The Russell 2000 index was up 8.7% in December, bringing its calendar year 2020 return to 20%.\n
The bond market (as represented by the Barclays Aggregate Bond index) was relatively flat in December. However, the index was up 7.5% for the year as high-quality core bonds provided a ballast for portfolios through volatility earlier in the year.\n
Much of the positivity being expressed in markets most recently is the result of the development and approval of multiple Covid-19 vaccines, with the hope that a return to normal is on the horizon in 2021. It is amazing when you consider that approximately one year after the disease emerged, multiple vaccines have been created and approved for use with the public.\n
The biggest vaccination rollout in history is now underway with more than 12 million people globally having received their first shot (more than 4 million of those are in the US)[2]. The Pfizer\/BioNtech, Moderna, and AstraZeneca\/Oxford vaccines have gotten most of the attention in the US and Europe, however, four other vaccines have been approved for public use in other countries according to Bloomberg.\n
While the heroic effort by healthcare workers to both save lives and bring a vaccine to the masses in record time should be applauded, many challenges related to our physical and economic well-being remain. For example, Covid-19 cases, hospitalizations, and deaths all remain near all-time highs in the US and only 1.3% of the population has received a vaccination thus far.\u00a0″},”source”:{“query”:{“name”:””},”props”:{}}},{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/2021\/01\/Nationwide-Covid-19-Metrics-7-Day-Average-Lines-January-2021-Monthly-Investment-Update.png”,”image_alt”:”A graph depicting nationwide Covid-19 metrics’ 7-day average lines from April 2020 to January 2021″}},{“name”:””,”type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”
While we believe the road to recovery has begun, we also recognize that much of what has been lost \u2013 including lives and livelihoods \u2013 cannot easily be replaced. As such, we anticipate many bumps along the way. The distribution of multiple vaccines, several of which require two doses weeks apart, to billions of people across the world represents a logistical challenge of epic proportions. In addition, many industries, including brick-and mortar retail, airlines, hotels, and restaurants, and those that work for those companies will continue to struggle until the pandemic recedes.\n
Going forward, we continue to see opportunities in many of the industries and sectors that have not rebounded to the same degree as other parts of the market. We will look for opportunities to add to those asset classes in 2021, while being mindful of the potential volatility that can arise as we attempt to recover from the damage done by the Covid-19 pandemic.\n
Investors who remained focused on their long-term investment plans were rewarded in 2020 despite the pandemic-induced volatility of the spring. As always, we encourage clients to revisit financial plans and target allocations periodically. Circumstances change and your financial plan may need to change with them. Please do not hesitate to reach out if you would like to discuss your situation in greater detail.”},”source”:{“query”:{“name”:””},”props”:{}}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”
Asset Class Returns”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”
| Category\n | Representative Index\n | Dec. 2020\n | YTD 2020\n | Full Year 2019\n\n | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Global Equity\n | MSCI All-Country\n | 4.6%\n | 16.3%\n | 26.6%\n\n | ||||||||||||||||||||||||||||||
| US Large Cap Equity\u00a0\n | S&P 500\u00a0\n | 3.8%\n | 18.4%\n | 31.5%\n\n | ||||||||||||||||||||||||||||||
| US Small Cap Equity\u00a0\n | Russell 2000\n | 8.7%\n | 20.0%\n | 25.5%\n\n | ||||||||||||||||||||||||||||||
| Foreign Developed Equity\n | MSCI EAFE\n | 4.7%\n | 7.8%\n | 22.0%\n\n | ||||||||||||||||||||||||||||||
| Emerging Market Equity\n | MSCI Emerging Markets\n | 7.4%\n | 18.3%\n | 18.4%\n\n | ||||||||||||||||||||||||||||||
| US High Yield Fixed Income\n | ICE BofAML High Yield\n | 1.9%\n | 6.2%\n | 14.4%\n\n | ||||||||||||||||||||||||||||||
| US Fixed Income\n | Barclays Aggregate Bond\n | 0.1%\n | 7.5%\n | 8.7%\n\n | ||||||||||||||||||||||||||||||
| Cash Equivalents\n | ICE BofAML 3 Mo Deposit\n | 0.0%\n | 0.5%\n | 2.2%\n\n\n\n
Source: Morningstar (total returns shown gross of fees) Prices & Interest Rates”}},{“type”:”text”,”props”:{“margin”:”default”,”column_breakpoint”:”m”,”content”:”
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