The S&P 500 and Dow Industrials wrapped up a roller-coaster year at new all-time highs, a surprising finish given the U.S. plunged into a recession caused by the COVID-19 pandemic that continues to plague the world. Despite ending the year with the highest single-day viral death toll of over 3,900, Wall Street investors embraced news that over 3.17 million coronavirus vaccinations have been administered in the U.S. and 10.3 million worldwide. Among the three major U.S. equity averages, the Nasdaq Composite performed best in 2020, up 44.9%, more than twice the S&P 500’s 18.4% return and more than four times the Dow Industrials’ 9.7% full-year gain.
The unprecedented recovery is due to record low interest rates, free-flowing liquidity backed by asset purchases from the Federal Reserve and two major Congressional fiscal stimulus programs that act to backstop the economy. Upon the early 2020 onset of the pandemic, the S&P 500 suffered a 34% market plunge in just 33 calendar days (3x faster than the bear market of 1987), yet the index fully recovered those losses in less than five months, the third-fastest recovery on record. Along the way, the S&P 500 set 33 new all-time highs amid twice the historical average volatility.
- In December, the Dow Industrials gained 3.4% and the Nasdaq Composite advanced 5.7%.
- On a quarterly basis, the Dow Industrials gained 2,824 points (+10.7%) and the Nasdaq Composite surged 15.6%.
- Since plunging to the March bear market low, the S&P 500 has risen 70.2%, the Dow Industrials rebounded 67.4%, and the Nasdaq Composite has surged 89.1%.
- U.S. crude oil futures gained 7% last month as demand outlook improved, extending 4Q gains to over 20%. Yet due to COVID-19, U.S. oil is down 20.5% from the end of 2019.
- Gold posted its best annual gain in a decade, up almost 25% for the year, while silver prices surged over 47%. Precious metals were aided by a weaker U.S. dollar that ended near a three-year low.
The Quarterly Recap is published by Cetera Investment Management LLC, an SEC registered adviser owned by Cetera Financial Group. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers.