As I look back and provide a post-mortem review of 2020, Covid-19 really shaped much of the economy. In March, we did see one of the quickest market declines in history, with the S&P 500 taking 117 trading days to drop 34% and then recover (Visual Capitalist). Central Banks around the world began suppling fiscal stimulus to thwart economic slowdown, with the US increasing its balance sheet by 3.2 trillion dollars (Factset, Federal Reserve). On a year-to-date basis, the broad S&P 500 market increased about 16%, but the majority of this growth was attributed to the top 5% of its companies. In fact, the largest 5 companies in the tech sector now make up approximately 20% of the S&P 500 market cap (1932 Asset Management: Factset). Yes, 2020 saw many changes to not only markets but people’s livelihoods as well, leaving us to reflect and warmly welcome a New Year.
As we say good riddance to 2020, we enter 2021 with what is being considered a new market and business cycle. Bloomberg Consensus indicated that G-20 GDP growth outlook will be positive 4.4% (1832 Asset Management) with corporate earnings being broad-based and powerful. Currently, OECD leading indicators also point to continued improvement in the global economy and in this environment, stocks typically outperform bonds (Zyblock, Dynamic Fund).
Through all this data and interpretation, I have found that market corrections never come with warning labels. For this reason, I always advise that your portfolio must be aligned with your risk and objectives. As Warren Buffet said, “the real fortunes have been made by people who have been right about the business they invested in, and not right about the timing of the stock market.”
Overall, 2021 looks to have a better start. The arrival of a Covid vaccine will hopefully begin to reduce the spread and devastation of the coronavirus.