Monthly Market Recap: January 4, 2021

December Market Recap

January 4, 2021

Take a deep breath and allow yourself a smile. You survived 2020.

Congress finally gave us the stimulus markets had long been expecting, and a steady dose of positive vaccine developments helped fuel stock prices to new highs. While those realities might seem inevitable in hindsight, they represent significant milestones nonetheless in this fight to outlast a global pandemic.

The Dow Jones Industrial Average, S&P 500, and NASDAQ all gained more than 3% in December. In normal times, we might describe this as a particularly strong month. In 2020, it seems a rather benign conclusion to a most unusual year. Still, gains are to be celebrated and December provided a fitting end to an incredible 9-month surge for stocks.

Every one of the 11 sectors in the S&P 500 climbed higher last month. Financials (+6.3%) and Energy (+4.4%) were among the top performers for the second month in a row. Technology (+5.7%) also capped off an incredibly profitable year with a flourish. Utilities (+0.7%) and Industrials (+1.2%) provided more meager returns.

Index December 2020 Full Year 2020
Dow +3.87% +7.25%
S&P 500 +3.71% +16.26%
NASDAQ +5.65% +43.64%

No matter what happens in the year ahead, we can marvel at the resiliency the stock market displayed in 2020. Perhaps the ultimate silver lining to a year with so many negatives was the strong rebound in equity prices from their March lows.

That strength persisted through year-end. Many large-cap stocks moved to record highs in the first few days of December. By the final week of 2020, all the major US equity indices reached record highs.

Calendar year returns for the Dow and S&P 500 may appear modest, but their meteoric rise since the bear market bottom (yes, there really was a bear market) better gauges the market’s rapid reversal of fortune. From March 23 through year-end, the Dow rose 68% and the S&P 71%.

The NASDAQ, meanwhile, is in another stratosphere. The tech-heavy index’s annual performance nearly tripled the S&P 500, and its 94% gain off the pandemic low is even more eye-opening.

It’s well-documented that technology stocks were disproportionately responsible for the stock market’s recovery. Here are a couple datapoints to drive that point home. Three of the largest companies by market capitalization – Apple, Amazon, and Microsoft – generated 53% of the S&P 500’s total return in 2020. The Technology sector as a whole accounted for 69% of the S&P’s calendar year gains.

Although small-cap stocks lagged for most of the year, a furious fourth-quarter rally eliminated that gap by year’s end. The Russell 2000 climbed more than 30% in the final three months of 2020, including an 8.5% gain in December. It’s the best quarterly performance for the Russell since 1979, when data began being collected.

The most recent of those gains were made possible by Congress finally agreeing to a second round of fiscal stimulus on December 21. The legislation will bring roughly $900 billion of aid to American families and small businesses, including $600 checks for individuals who earned less than $75,000 in 2019 (and $1,200 for joint-filing couples who earned less than $150,000). The income restrictions are less generous than the first round of stimulus checks generated by the CARES Act in late March.

The long-awaited arrival of a safe COVID-19 vaccine also boosted investor sentiment last month. The US Food and Drug Administration (FDA) granted its first emergency use authorization to Pfizer-BioNTech on December 11. A second vaccine developed by Moderna received the same FDA authorization for distribution a week later.

International equities outperformed in December. The MSCI EAFE index rose 5%, while the MSCI Emerging Markets benchmark gained 7.1%. The ongoing Brexit saga seems as close as ever to a conclusion now that diplomats from the UK and European Union agreed to the terms of a new trade deal on December 24.

Interest rates nudged higher with the 10-year US Treasury yield nearly touching 1% for the first time since early March. They finished the year at 0.92%, up slightly compared to a month earlier (0.84%).

Oil prices continued to rise, helping to ignite strong performance among Energy stocks the last two months. West Texas Intermediate Crude gained another 6.8% in December and traded above $49 per barrel mid-month. It last hit $50 per barrel in February.

Gold prices also enjoyed a strong finish to the year, increasing 7% last month.

 

 

 

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Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Stock prices and index returns provided by E-signal.