From the vantage point of mid-January, 2020 seems long ago and far away. Continuing turmoil may affect the market for some time to come. Yet with so many outcomes unknown, some things remain constant, including fundamental principles that underlie successful long-term investing. This month I am sharing a 2020 capital markets recap reprinted in full from DFA.

 

Global markets staged one of their biggest rallies in years in November, propelled by progress on coronavirus vaccines and investor relief over the end of a polarizing US presidential election. A wide range of stocks fueled the run-up, expanding support beyond the few dominant technology companies that drove up indexes earlier this year. Better than expected corporate earnings across multiple sectors added to the surge. With nearly all S&P 500 companies reporting, analysts are projecting third quarter profits fell -5% from a year earlier, which is a marked improvement from the -20% decline forecast at the end of September.

 

Long-predicted volatility showed up like a sudden, fast-moving storm in the final week of October. Election jitters, Congressional failure to deliver a Covid-relief package, new lockdowns in Europe, and a rapid rise in US Covid cases gave investors all the reasons they needed to dump stocks. The carnage was severe, with the S&P shedding 5.6%, the Dow dumping 6.5%, and the tech-driven Nasdaq losing 2.4% in just one week. For the month, all three indexes lost 2% or more. 

Investors could be forgiven for feeling disconnected from reality at the end of Q3 2020. Among many disrupted patterns and expectations, we’ve witnessed a skyrocketing stock market amidst deepening global economic pain and human suffering. Yes, there are always opportunities hidden within calamities. But who could have predicted the astounding gains of the last two quarters?

In August the stock market seemed to shrug off the bad and worrisome news related to Covid-19. Instead, investors continued to pour money into tech and communications stocks perceived to be essential to the new stay-at-home world in which we now live. How to make sense of it all? This month we dive into explanations for tech’s skyrocketing valuations—and the things that could make those valuations take a nosedive. We begin with a look at the market’s stellar performance in August.

A feeling of “what’s next?” is in the air. By now, Congress has gone home for the summer. Efforts to put more money in the pockets of tens of millions of unemployed Americans are stalled. Fall campaigning and mud-slinging have begun in earnest. Covid-19 rages on, a deadly whack-a-mole game played across the earth. Amid the uncertainty, July markets did well. But what can we read into the dollar’s decline and gold’s ascent? Let’s take a look.

If you had lived on a mountaintop for the first six months of 2020, unaware of all the tumult below, you may have concluded that nothing much happened to move the markets while you were gone. By the end of June 2020, the S&P 500 Index was down just slightly from where it began the year. This sanguine performance came despite scenes of death, destruction, isolation, outrage and fear that have rarely been witnessed on such a global scale. We offer our Q2 wrap-up and perspective here, followed by the June market report.

 

Despite more than 108,000 US deaths from Covid-19 and deep job losses caused by the economic shutdown to prevent even more fatalities, US stock prices are hovering within 8% of their all-time peaks reached earlier this year. How does this square with the bleak news of the past month? We share our thoughts on a turbulent period of social unrest and economic uncertainty following a brief market summary.

April was a temperamental month filled with swings in investor mood and sentiment. And despite a blockbuster performance by stocks, it was a month filled with anxiety. How can we go about our day-to-day lives while bracing ourselves for further volatility? We offer our perspective here.

Just weeks after climbing to record heights, US stocks sank more than 30%, ending the longest bull market ever and returning stock prices to where they were when President Trump took office in January 2017. Oil stocks slid to an 18-year low. A stampede out of bond markets and into cash added to the chaos. Many financial analysts believe that the value of private equity investments have been eroded even more than the broader stock market, due to the high leverage involved in most private equity deals. What should you do now? Here we offer context and guidance, followed by a review of Q1 numbers.