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December 2020 Market Insights Thumbnail

December 2020 Market Insights

Investment Management

By: Linda S. Parenti, CFA – Chief Investment Strategist

It has been a year like no other! Here are just some of the historic firsts we have seen in 2020:

  • A global pandemic which forced a shutdown of economies across the globe.
  • The 10 Year U.S. Treasury yield drops below 1%.
  • The end of the second longest bull market run in history for the S&P 500.
  • The fastest market decline into bear market territory, with the index falling 27% in just 22 days.
  • The shortest bear market on record for the index, lasting only 33 days.
  • The quickest market rebound to the start of a new bull market for the index in only 16 days.
  • The Dow Jones Industrial Average index surpass the 30,000 level.
  • A record breaking 30 Atlantic hurricanes, 12 of which made landfall in the U.S.
  • Effective coronavirus vaccines developed and distributed in less than 12 months.

It is also worth noting that the S&P 500 has marked 30 new closing highs this year and rallied 64% from its March low as of yesterday’s close. The technology heavy NASDAQ Composite has registered 50 new closing highs so far this year. I am not sure if that is a record number of new highs in a single year for that index, but it is certainly impressive. In addition, after years of lagging their large size peers, small company stocks tracked by the Russell 2000 index have reached nine new record closing highs year-to-date.

And this unprecedented year is not over yet! There are three weeks to go before we wave goodbye to 2020 and many uncertainties remain. COVID-19 still threatens lives, and we know to expect several hard months ahead during which the toll will be high for patients and healthcare workers alike. Rising cases are burdening our healthcare system and once again causing closures in a growing number of locations. As a result, measures of economic recovery are showing signs of slowing down. Agreement continues to be elusive in D.C. on the next stimulus package which is needed to help the economy continue its recovery. The extent of future changes in tax legislation and regulation will be influenced by the makeup of the Senate, the party control of which will be unknown until the January 5, 2021 Georgia runoff.

Yet, I remain optimistic for equities and the economy in 2021. The health of both depends on the prevalence of COVID-19. Pfizer’s vaccine is days away from being approved and distributed for emergency use in the U.S. FDA advisors will then consider approval of Moderna’s vaccine for emergency use. Access to a vaccine is expected to become widely available by the second half of the year. That timeline could shorten as additional vaccines seek and win approval. As the year progresses, vaccines and warmer months ought to slow the rate of new case growth. Our lives and activities will start to return to normal. In the meantime, we should see another stimulus package, if not by year end, then sometime early next year. The combination of supportive monetary policy and additional fiscal aid should help provide the bridge needed for the economy to reach a sustainable recovery.

Linda S. Parenti, CFA
Chief Investment Strategist

RISKS AND IMPORTANT CONSIDERATIONs

Views and opinions expressed here are for informational and educational purposes only and may change at any time based on market or other conditions or may not come to pass. This material is not a solicitation to buy or sell securities and should not be considered specific legal, investment, or tax advice. The information provided does not consider the objectives, financial situation, or needs of any specific individual. All investments carry a degree of risk and there is no certainty that an investment will provide positive performance over any stated period. Equity investments are subject to company specific and market risks. Equities may decline in response to adverse company news, industry developments, or economic data. Fixed income securities are subject to market, credit, and interest rate risks. As interest rates rise, bond prices may fall. Past performance is no guarantee of future results.