Investment Commentary – 4th Quarter 2020

Market Report

Investment Commentary – 4th Quarter 2020

End-of-year market review


While we know the turning of the digit from 0 to 1 didn’t change the alignment of the universe, December’s developments make it easier to approach the new year with a feeling of new possibilities. Vaccines are being distributed, the major market indices show between modest and stellar growth and some of the sectors of the economy most diminished by the pandemic are demonstrating strength. 

As Raymond James Chief Investment Officer Larry Adam put it, “December punctuated a surprisingly strong market year with an exclamation point.” For much of the year, the story in equities has been about big technology stocks and then everything else – the tech-focused NASDAQ closed the year up 43%. Over the last couple of months market strength has broadened, and December continued this trend with small-cap stocks, international equities and lagging sectors like Energy and Financials outperforming the average. 


The ongoing pandemic is expected to dominate the economic outlook in the first part of the year, according to Chief Economist Scott Brown, with continued restraint on consumer services. As vaccines are distributed, people should become more comfortable going out again. Activity in face-to-face industries, such as travel, hotels, restaurants and in-person entertainment, should pick up substantially in the second half of the year.

The Federal Reserve is expected to remain accommodative, with short-term interest rates remaining low through 2023. The recent fiscal aid package will provide important support in the near term. All the good news, of course, comes as COVID-19 continues to hold record high rates of cases and vaccinations are expected to continue into the middle part of the year. Though we may be at the beginning of the end, it’s still not the end.

Let’s now look at the tale of the tape between the closing bells of 2019 and 2020.


  12/31/19 Close 12/31/20 Close Change
Year to Date
% Gain/Loss Year to Date
DJIA 28,538.44 30,606.48 +2,068.04 +7.25%
NASDAQ 8,972.61 12,888.28 +3,915.67 +43.64%
S&P 500 3,230.78 3,756.07 +525.29 +16.26%
MSCI EAFE 2,036.96 2,147.53 +110.57 +5.43%
Russell 2000 1,668.47 1,974.86 +306.39 +18.36%
Bloomberg Barclays Aggregate Bond 2,225.00 2,392.02 +167.02 +7.51%
Performance reflects price returns as of market close on Dec. 31, 2020.


And here’s a look at some of the details: 

Washington settles its “will they or won’t they”

The $900 billion support package passed by Congress and approved by the White House will provide support through the spring for small businesses, state-run unemployment insurance, the vaccine rollout, and direct cash to many Americans. We’re now looking at further actions, possibly in March, Washington Policy Analyst Ed Mills said, which is when many of these supports will sunset. The shape and scope of a next stimulus package likely depend on the outcome of the two Senate runoff elections in Georgia, and how the economy weathers its entry into spring.

The global picture

Global equity markets are riding near all-time highs despite the pandemic’s backdrop as governments and central banks sustained support through the year. The narrative through the year was similar to the U.S. As European Strategist Jeremy Batstone-Carr said, “New-economy digital and environmental transformation sectors, supported by healthcare, performed strongly. In contrast, ‘old economy’ value sectors such as banks, airlines, energy and leisure performed poorly.” And also as in the U.S., there appear to be opportunities here to capitalize on the return of strength across a broader market. With a Brexit deal, Europe-wide fiscal supports and stimulus around the world, “economic prospects for the next 12 months and beyond feel considerably brighter.”

The bottom line

We’re not out of the weeds yet, but there seems to be real momentum behind the market and an opportunity to potentially pick up value from stocks most tied to an economic recovery, as well as some possible stability from 2020’s top performers. Still, there is a good chance we’re going to see bumps in the road. 

I am wishing you the best for this new year and, as always, thank you for your continued trust in me as we work toward your goals through 2021 and beyond. 

Richard H. Wagener
Managing Partner
Branch Manager, RJFS


Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the judgment of the Raymond James Chief Investment Office and are subject to change. There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Past performance may not be indicative of future results. Economic and market conditions are subject to change. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 is an unmanaged index of small cap securities. The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. An investment cannot be made in these indexes. The performance mentioned does not include fees and charges which would reduce an investor’s returns. Small cap securities generally involve greater risks.  International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks. These risks may be greater in emerging markets. Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. Raymond James does not provide tax services. Please discuss these matters with the appropriate professional.

Material prepared by Raymond James for use by its advisors.