- The S&P 500 Index: Top Heavy & Tech Heavy: Take a look at our latest article that explores how mega-cap technology companies affect the S&P 500 index fund and what this means for your investment portfolio
Despite the COVID-19 pandemic that threatened to wreak havoc on the global economy and a hotly contested and controversial U.S. Presidential election, financial assets showed tremendous resilience and provided healthy returns for investors in 2020. Coordinated fiscal and monetary stimulus allowed markets to rebound sharply from their March lows and provided the support necessary to propel an economic recovery.
U.S. Equities: U.S. stocks in 2020 withstood tremendous volatility to once again produce double digit positive returns across all major broad market indices. The S&P 500 index posted an impressive total return of 18.4%, while small cap stocks rode a fourth quarter surge to even higher gains (Russell 2000 index, 20.0%). There was a dramatic disconnect between growth stocks and value stocks, with the former outperforming the latter by an overwhelming margin (Russell 1000 Growth index, 38.5%, vs. Russell 1000 Value index, 2.8%).
International Equities: International stocks again trailed U.S. stocks in 2020 but gained ground in the fourth quarter and posted solid positive returns for U.S. investors, partially fueled by the flagging dollar. Emerging market stocks outpaced developed market stocks for the year by a wide margin (MSCI Emerging Markets index, 18.3%, MSCI EAFE index, 7.8%, both in USD terms).
Fixed Income: Bonds once again produced better than anticipated returns in 2020 (Bloomberg Barclays U.S. Aggregate Index, +7.5%) as the Federal Reserve slashed interest rates to help stimulate the economy. Corporate spreads widened materially in March but quickly reverted to normal as investor panic receded.
REITs: REITs were one asset class that struggled in 2020 (FTSE NAREIT Equity Composite, -8.0%) as the pandemic exacerbated concerns in the retail sector and created new uncertainty for the office sector.
Commodities: Commodities saw mixed results in 2020, as energy lagged (the price of West Texas Intermediate crude oil dropped over 20% to $48.52 per barrel at year-end) while precious metals rallied (gold climbed almost 25% to close the year at $1,899 per ounce).