This is the annual edition of the scorecard, looking at the most important events over the past year that shaped global markets.
- If 2020 was one of the worst years in recent memory for the global economy and society at large, you would not see that reflected in stock market prices. The broad markets were all up double digits this year, as investors chose to ignore bad economic news and instead focus on the massive stimuli launched by the developed world’s central banks to cope with the coronavirus pandemic.
- The year 2020 started with a rally in global stocks as economies were largely growing at a decent pace. It all ended in mid-March when the coronavirus pandemic led to stay-at-home orders, hitting some parts of the economy pretty hard, like airlines, the hospitality industry, and restaurants.
- The broad market lost about 50% in just a few weeks in March but recovered relatively swiftly and was soon reaching new record highs. To be clear, the recovery was not even. While some technology darlings like Amazon, Zoom Communications, Tesla, and Apple surged to record highs, most others like airlines, energy, and financials failed to recover to their pre-pandemic highs.
- The overall global economy is still in bad shape. Many economic indicators fell to historic lows in April and May but staged a recovery as lockdown measures eased. However, with the numbers of new infections rising again across the world, the prospect of more economic pain is strong.
- By the end of 2020, two coronavirus vaccines were approved, one from Pfizer and another from Moderna, with the former already starting to roll out in the UK. However, pundits have reckoned it will take at least six months before the effect of the vaccines on social and economic life is visible.
- Democrat Joe Biden won the U.S. elections, in a blow to current President Donald Trump, who hoped to win a second term. A Biden presidency is unlikely to have a negative impact on the market, particularly after revelations that former Federal Reserve chair Janet Yellen will serve as the next Secretary of Treasury. The new administration led by Biden will be inaugurated on January 20, 2021.
- We provide this report on a fortnightly basis. To stay up to date with mutual fund market events, come back to our news page here.
U.S. Broad Indices
- The broad markets were up double digits this year.
- Vanguard’s Small-cap Index Fund (VSCIX) was the best performer with an advance of 17%, although not far from it are mid-caps and the Russell 3000 Index.
- Wilshire 5000 Index Fund (WFIVX) was by far the worst performer from the pack this year with an advance of just 8.7%.
- Fixed income assets were all up, with one exception.
- Vanguard’s Long-term Investment-grade Bonds Fund (VWESX) gained 9.3% so far this year, beating peers by a pretty wide margin.
- Vanguard’s High-yield Bonds Fund (VWEHX) is the worst performer and the only faller, down 0.17%.
- In sectors, performance was extremely disparate.
- T. Rowe Price’s Communications and Technology Fund (PRMTX) surged more than 45% for the year, as its top holdings Netflix, Amazon, and Facebook benefitted from the stay-at-home economy.
- At the other end of the spectrum are energy stocks, as represented by Vanguard’s Energy Fund (VGENX), which fell by nearly 31% for the year.
- Foreign equities were all up, with one exception.
- Chinese shares, as represented by Fidelity’s China Region Fund (FHKCX), posted the best performance for the year, up 34.7%, as the country succeeded in culling the pandemic early and has not seen a second wave.
- Latin American shares, as represented by Fidelity’s Latin America Fund (FLATX), is the worst performer with a decline of more than 22.6%.
- Alternative assets’ performance was weak.
- Vanguard’s Real-estate Index Fund (VGSLX) was the worst performer with a decline of 7% for the year.
- Pimco’s Emerging Markets Currency Fund (PCRIX), meanwhile, was the best performer with a tepid rise of 0.4%.
The Bottom Line
Be sure to sign up for your free newsletter here. to receive the most relevant updates.
Fund returns are for the period between January 1, 2020 and December 18, 2020.