The longer-term trends that could impact the next couple of years
Let’s be honest, The Dow Jones Industrial Average (DIJA), the S&P 500, and the NASDAQ all delivered what may very well be the most surprising year in recent history. While most of us are ecstatic seeing 2020 in the rear-view mirror, yet the 2020 performance for the significant United States indices was nothing short of impressive and not something we want to say goodbye to. Performance stayed strong throughout even the most turbulent parts of 2020.
Nobody could have predicted that:
- The DJIA would rise 10.2% in Q4 or that it would end the year up 7.3%.
- The S&P 500 would rise 11.7% in Q4 or that it would end the year up 16.3%.
- NASDAQ would ride 15.7% in Q4 or that it would end the year up 43.6%
Now, entering 2021, there isn’t going to be a shortage of folks attempting to frighten investors by saying we’re in a stock market bubble. They could be right about that, but the silver lining is that there are plenty of people saying that markets still have quite a bit of room to grow. The fact of the matter is that this topic is currently dividing some of the brightest finance minds.
Rather than just hopping down into that rabbit hole, let’s try to figure out what it is the stock markets are saying to us. Are there any trends developing that could shape the next couple of years? Has COVID-19 permanently changed the landscape of some industries at the expense of others? Perhaps the best and worst-performing stocks of 2020 from the DJIA and S&P500 can give us some insight.
Best and Worst 2020 Stocks in the DJIA
2020 witnessed around 2/3 record positive performance within the DIJA. The gap between the top and bottom performing stocks was wide.
Company 2020 Total Return
Apple Inc. +82.3%
Microsoft Corporation +42.5%
Nike +41.0%
Salesforce.com Inc. +36.8%
Caterpillar Inc. +27.0%
Merck & Co. Inc. -7.2%
Intel Corporation -14.7%
Chevron Corporation -26.0%
Walgreens Boots Alliance -29.4%
The Boeing Company -33.9%
Best and Worst Stocks in the S&P 500
As indicated below, the gap between the highest and lowest performing stocks in the S&P 500 was massive and could be argued that it’s logic-defying.
Company 2020 Total Return
Tesla +743.1%
Etsy +301.6%
Nvidia +121.9%
PayPal +116.5%
L Brands +105.5%
Marathon Oil Corporation -51.1%
TechnipFMC PLC -56.1%
Norwegian Cruise -56.2%
Carnival Corp -57.2%
Occidental Petroleum Corp. -57.7%
We Know What Happened
The COVID-19 pandemic quite literally shocked markets early in 2020, which essentially froze the global economy as businesses and schools shut down. Those who had the ability to began working and shopping from home while business which relied on a physical customer presence like restaurants and airlines suffered.
As vaccines begin to be distributed we need to ask ourselves: are these short-term shifts or longer-term ones? If we think they are longer-term, what should we do about it?
What To Do Now
The answer to the question above is pretty personal, and depending on your perspective of the situation the course of action you take is personal too. Here at NEST Financial, we would encourage you to think beyond just investing.
Some other aspects to consider:
- Is your living space equipped for you to work from home long-term?
- Do you have enough cash reserves in case of an emergency?
- Are your estate planning documents updated?
Lastly, if you are thinking about altering your asset allocations due to what you think could be longer-term trends, give us a call so we can discuss.
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