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2020 Market Review

By VerityCU January 29, 2021 Cfs at verity credit union

Authored by Gavin Chinn, CFS* advisor at Verity Credit Union 

2020, what a year, right? A global pandemic, a worldwide recession, a social inequity awakening, and a transformative election season. Well, we made it to 2021. And while the
flipping of a calendar page doesn’t really change a lot, it did bring one thing: the return of the Investment Services blog posts! It’s been a while, but we’re back.

I’m not one that is big on convention, but I think that the obligatory market review is appropriate for the first blog of 2021. And what a year to review. In 2020, the S&P 500 gained 18.4% (total return) while the blue chip Dow Jones Industrial Average added 9.72%*. The tech heavy Nasdaq, aided by the many stay at home and work from anywhere stocks, gained a gaudy 43.64%**. Amazing. Internationally, the developed markets were much more tame with the MSCI EAFE index gaining 8.28%, while the emerging markets (MSCI EM) rose by 18.69%***. Bonds were not to be left behind as the Bloomberg Barclays US Aggregate Bond index added 7.50%^.

None of this was a walk in the park. On February 19th of 2020, the stock market (as measured by the S&P 500) hit an all-time high of 3,386.15^^. Less than a month later, the US economy was significantly shut down as Covid-19 continued its deadly incursion throughout the world. By March 23rd, the stock market had dropped 34% to a low of 2,237.40^^. This was the fastest move from all time high to bear market territory (a drop of 20% or more) in the history of the market.

Shortly thereafter, on March 27th, the CARES act was passed. A $2.2 trillion stimulus package designed to help people and businesses survive the shut down and the subsequent recession. Alongside this fiscal response, the Federal Reserve created needed liquidity by opening loan facilities to purchase almost every type of debt imaginable. A veritable monetary policy bazooka, this strategy aimed to keep money flowing through the economy.

As the summer approached, investors seemed optimistic about the reopening of the economy. Allowing restaurants and retail shopping to resume service seemed to be right around the corner. Despite record unemployment and GDP in free fall, the S&P 500 rallied and surpassed its February record, setting a new all-time high of 3,580.84^^ on September 2nd. The next couple months were filled with volatility as we approached and digested the election. Then we continued on to close the year at more new highs. Phew!

Regardless of the calendar changing, we still face many of the same problems as we did in 2020. Among other things, the pandemic remains. But, hopefully we are gaining some traction in this battle. Vaccinations are now front and center as the best way to save lives and restart commerce. Masking has become a priority and more fiscal support seems to be on the way. The political landscape has changed dramatically, but opening the US economy is still a priority. And while the stock market continues to soar, last year was a good plug for long term investing. At times it felt terrible to be in the market, but if you just stayed with a long term strategy and remained invested, you would’ve been fine. Because, as always, your best chance for success is investing for the long term.

 

* spglobal.com
** macrotrends.com
*** msci.com
^ morningstar.com
^^ Yahoo Finance

*Non-deposit investment products and services are offered through CUSO Financial Services, LP (“CUSO Financial”) (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CUSO Financial: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial. Verity Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members. Atria Wealth Solutions, Inc. (“Atria”) is not a broker-dealer of Registered Investment Advisor and does not provide advice. CUSO Financial is a subsidiary of Atria.