U.S. Versus International
The S&P 500, an index of large U.S. companies, posted a total return of 11.7% for the Fourth Quarter of 2020, bringing performance to 15.4% year-to-date in 2020. U.S. stocks outperformed international for the quarter as measured by the iShares MSCI EAFE ETF, a representation of international stocks outside the U.S. EAFE total return for the Fourth Quarter of 2020 was 15.7% and year-to-date was 6.5%.
The approval of COVID-19 vaccines in many parts of the world prompted a strong recovery in stocks, particularly in international stocks. These stocks have been priced at a lower value versus their earnings, which gives them an opportunity for greater upside return. It is anticipated that the vaccine will allow a return to travel and business activity in 2021.
Countries with a significant piece of their economy tied to oil and energy, such as Latin America and the Middle East outperformed other countries in the fourth quarter. Energy stocks saw a strong recovery as expectations for travel and the movement of goods accelerated.
U.S. Sectors
Top performing U.S. S&P 500 sectors as reported by Koyfin Performance Software for the fourth quarter of 2020 by total return included Energy (32.3%), Financials (22.9%) and Basic Materials (16.0%). Laggards for the fourth quarter include Real Estate (3.3%), Utilities (5.4%) and Consumer Staples (5.5%).
For all of 2020, the top performing U.S. S&P 500 sectors as reported by Koyfin Performance Software by total return included Technology (41.0%), Consumer Discretionary (28.1%) and Communications (25.4%). Laggards for 2020 include Energy (-33.3%), Financials (-2.7%) and Real Estate (-1.0%).
A sharp turnaround was seen in the fourth quarter for stocks that had been beaten down in 2020. Energy and financial stocks suffered during quarantine with the decrease in travel and business shutdowns that could lead to debt defaults. Energy stocks came roaring back in response to higher anticipations for travel and growth.