By SJS Chief Investment Officer Tom Kelly, CFA.
Ignorance is bliss. At least that’s how we feel about the markets in 2020. The person who did not look at the news or troubles of the world was rewarded with an incredible year in the markets. A good investment approach to 2020 would have been to fall asleep on January 1 and wake up on December 31, with a sleepwalk or two consisting of tax harvesting and rebalancing along the way.
Don’t get us wrong—we know that 2020 brought challenges for many, many people. But if we had told you at the beginning of the year that 2020 would bring a global pandemic that would cripple the U.S. gross domestic product (GDP) by 31% in the second quarter, cause 20 million lost jobs in April, and lead to a contested presidential election in November, chances are you would have sold all your stock.[1][2][3] You and us both!
![Source: Dimensional Fund Advisors. See Important Disclosure Information [4] for index information.](https://images.squarespace-cdn.com/content/v1/5ee8ee8eb4fb337e3b806c1e/1610997932869-OYI16YSTUDTC7TE3P5IF/2021.01.22+2020+Global+Asset+Class+Returns.JPG)
Source: Dimensional Fund Advisors. See Important Disclosure Information [4] for index information.
But that is indeed what happened, and it sure would have been foolish to be wise. In 2020, the broad U.S. stock market went up over 20% and international markets went up over 7%; even bonds had strong positive returns. About the only thing that didn’t go up is real estate, which went down 9% for the year, but ended strong with a 12% return in the fourth quarter. The benefits of a well-diversified portfolio were realized as well, with large caps and small caps trading punches as the months rolled on but sharing similar total year results.[4]
While 2020 was nowhere near perfect, we hope it allowed you to grow closer to loved ones, appreciate the little conveniences a little more, and become a bit more resilient with whatever comes your way. Who knows what’s in store for 2021? Whatever it brings, leave the worrying to us, knowing that your MarketPlus Portfolio is battle tested, incorporating academic advances in portfolio design with our 25-plus years of real-world investment experience to help you achieve your specific financial goals.
Important Disclosure Information and Sources:
[1] “Gross Domestic Product.” U.S. Bureau of Economic Analysis, bea.gov.
[2] “Payroll employment down 20.5 million in April 2020.” U.S. Bureau of Labor Statistics, 12-May-2020, bls.gov.
[3] “Electoral College makes it official: Biden won, Trump lost.” Mark Sherman, 14-Dec-2020, apnews.com.
[4] Source: Dimensional Fund Advisors, Morningstar. Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net div.]), Emerging Markets (MSCI Emerging Markets Index [net div.]), Global Real Estate (S&P Global REIT Index [net div.]), US Bond Market (Bloomberg Barclays US Aggregate Bond Index), and Global Bond Market ex US (Bloomberg Barclays Global Aggregate ex-USD Bond Index [hedged to USD]).
There is no guarantee investment strategies will be successful. Past performance is no guarantee of future results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with management of an actual portfolio. In US dollars. The index performance figures assume the reinvestment of all income, including dividends and capital gains.
Hyperlinks to third-party information are provided as a convenience and we disclaim any responsibility for information, services or products found on websites or other information linked hereto.
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