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Market Highlights Q4 2020
Despite the highest volatility level since 2008—including a 33.79% drop in the S&P Index in March as the pandemic worsened around the globe—global stock market returns in 2020 were above their historical norm. In the fourth quarter alone, each of the major indexes posted double-digit gains, with the Russell 2000 surging 30.99%, the Nasdaq gaining 15.41%, and the S&P 500 up 11.69%. As the quarter’s ‘laggard,’ the Dow rose 10.17%. On the last day of the year, the Dow and the S&P 500 ended at all-time highs, with all of the benchmark indexes listed here ending 2020 well ahead of their 2019 closing marks. The tech stocks of the Nasdaq, which gained more than 43.0%, led the way, followed by the Russell 2000, the S&P 500, the Dow, and the Global Dow. As you can see above, the year-over-year growth was better than any of us could have hoped.
As unexpected as it was, the 2020 economy and market underscored the importance of staying broadly diversified across companies and industries. The downturn in stocks impacted some segments of the market more than others in ways that were consistent with the impact of the COVID-19 pandemic on certain types of businesses or industries. The airline, hospitality, and retail industries tended to suffer disproportionately with people around the world staying at home, while companies in communications, online shopping, and technology emerged as relative winners during the crisis. In any market, there will be winners and losers—and investors have historically been well served by owning a broad range of companies rather than trying to hand pick who will win each race.
2020 illustrated two of the great lessons of investing: diversification reduces risk, and sticking with your plan yields long-term growth. In 2021, we will continue to focus on growing your long-term wealth—together.