The stock market fell off a cliff in March of 2020, recovered nicely, and reached new highs during the fourth quarter. Those who sold and went to cash in March and April have suffered. Those who stayed the course had a good year. Those who put cash to work in the markets in March and April have had an excellent year.

This year has been a case study in the benefits of staying the course and maintaining good financial habits.

Let’s look at specifics.

Bonds
Municipal bonds were up 3.15% for the year and have five and ten-year average annual returns of just over 2%. Intermediate-term corporate bonds were up just short of 10% for 2020 and have five and ten-year average annual returns of about 6%. Intermediate-term government bonds were up 9% in 2020 and have five and ten-year average annual returns of about 5%. Overall, a good year for bonds as interest rates continued to drop, and the stock market experienced a sharp drop.

International Stocks
International small caps were up 11.5% in 2020 and have averaged 8.3% annually over five years, 5% over ten years. Emerging markets stocks were up 15% in 2020. They have averaged 12.4% annually over the last five years and 3.5% annually over the last ten years. Across all international markets and company sizes, those stocks were up 11.2% in 2020. The five-year average annual return is 9% while the ten-year average is 5.25%.

Domestic Stocks
Large growth stocks dominated in 2020. The NASDAQ, the S&P 500 Growth Index, and the Russell 1000 Growth were up between 33% and 40% for the year. The five and ten-year annualized returns for these indices range from 13% to 19%. Much of this return has been fueled by Amazon, Tesla, and a few similar stocks. Small cap growth stocks held their own in 2020, up almost 20% for the year, and averaging about 14% annually over the last five and ten years, as measured by the S&P 600 Growth Index.

Value stocks continued to lag, up in low single digits, 1.5% to 4.5% for 2020, depending on which index you follow. Over the last five and ten years, value stocks are up an average of 7% to 9% annually, again depending on index. As we have observed before, while value stocks are up, they have lagged growth stocks by a multiple of two since 2007.

So What?
What does all this mean to you? For many of you, it’s simply information. For those who are clients, it means that you are nicely ahead of the various market-related success targets we have set together. We will discuss these outcomes in more detail as we visit with you during this year.

Please reach out if and as you have questions. As always, we appreciate the opportunity to serve.