Join Dave Shotwell and Nick Nauta as they discuss the current financial climate and the 4th quarter of 2020.
- The main investment lesson for 2020 was to stay invested as much as possible. In January 2020, our main concerns were the impact of a trade war with China and the upcoming election. What if we had told you that there would soon be a global pandemic that would shake up the world’s economic system, and in the US we’d be dealing with wide-spread civil unrest and a toxic political atmosphere? Chances are, your expectations for the stock market would have been very negative, and in mid-March, those expectations would have been justified. As we move into 2021, the health situation remains unresolved, yet the markets continue to look at the future with optimism.
- The markets continued to defy the turbulent health and political situation, with the broad US market, as measured by the Russell 3000 index, returning 14.8% for the quarter and 20.8% for the year.
- Small-company stocks outperformed the broad domestic markets with the Russell 2000 index posting gains of 31% for the fourth quarter. Value stocks outperformed growth stocks in the fourth quarter for the first time in several years. The MSCI Emerging Market Index posted a gain of 22% for the fourth quarter.
- Going forward, the Federal Reserve has stated an intention to hold interest rates low despite increasing short – term inflation expectations. The policy view is that the economy needs borrowing costs to remain low in order to fully recover from the pandemic – induced slow down. Low-interest rates should mean a good environment for stocks and other risk assets. Further government stimulus is also expected to support higher stock prices as we move toward economic and health recovery.
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