What a year.
The widely followed S&P 500 index ended 2020 over 16% higher (18.4% total return w/ dividends) than it began the year even as it experienced one of the sharpest 34% declines in history (mid-February to mid-March).
The U.S. stock market managed a great year even in the midst of a global pandemic that saw businesses shut down, tens of millions of people lose their jobs, spike in corporate defaults, a steep recession (we’re still in BTW) and S&P 500 earnings that declined 13.6% from the prior year.
This means the entire increase in the S&P 500 was from expansion of the Price/Earnings multiple to over 30x, which is a level ONLY seen throughout history in the Dot-Com Bubble and Great Financial Crisis. The long-term average is about 16x.
We find that tech accounted for almost 70% of the S&P 500 total return with the top three companies (Apple, Amazon, and Microsoft) accounting for over HALF the total return. Remember when I spoke about “concentration” earlier in the year here and here?
Lance Roberts recently shared “The stock market has returned more than 125% since the 2007 peak, which is roughly 3x the growth in corporate sales and 5x more than GDP.”
Joel Greenblatt also shared an interesting stat recently, “If you bought every company that lost money in ’19 that had a market cap over $1 billion…you’d be up 65% so far this year.”
Obviously, the point I’m getting at is the stock market is not accurately reflecting the underlying economic fundamentals. This is not a recent phenomenon but really has been a feature for well over a decade.
“A mania first carries out those that bet against it and then those that bet with it.”
– Jim Rogers
My approach continues to be the same as it’s been… neutral or conservative positioning in global stocks barbelled with gold/silver/gold miners on one end and the U.S. Dollar/Treasuries on the other end.
Below is the return summary for more comprehensive indexes for the quarter, year, 3 years, and 15 years. The top performers for the year were gold and silver while the worst performers were real estate and the U.S. Dollar.
Below is an interesting chart I came across showing total returns of Gold, S&P 500, US Bonds and the U.S. Dollar since the 2000.
Disclosures:
Past performance is no guarantee of future results. All investments maintain risk of loss in addition to gain.
Data from third-parties is believed to be reliable but accuracy is not guaranteed. Much of the data used to interpret the markets and forecast returns are often at odds with each other and can result in different conclusions. Many different factors impact prices including factors not mentioned here.
This is NOT investment advice but merely a general commentary. Individualized investment advice cannot be provided until a thorough review of your unique circumstances and financial goals is completed.
Views provided here are current only as of the moment of posting and are subject to change at any time without notification.
