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Adaptive Advice – Weekly Market Update: 2020 ends with stock market at all-time highs 31-Dec-2020

December 31, 2020

A weekly recap of market activity and events, featuring commentary, analysis written with individual investors in mind.

The large-cap indices set fresh intraday and closing record highs in the last week of the year. The S&P 500 (+1.4%) and Dow Jones Industrial Average (+1.4%) both increased 1.4%, and the Nasdaq Composite gained 0.7%. The small-cap Russell 2000, however, pulled back from record territory with a 1.5% decline.

Besides momentum, which was arguably the main driver, supporting factors this week included President Trump signing the $900 billion stimulus and omnibus spending bill, and the UK approving the COVID-19 vaccine from AstraZeneca (AZN) and Oxford for emergency use. Neither were particularly surprising, but the news was good for sentiment reasons.

Ten of the 11 S&P 500 sectors contributed to the advance. The consumer discretionary (+2.0%), communication services (+1.9%), financials (+1.9%), health care (+1.9%), and utilities (+2.5%) sectors outperformed the benchmark index. The energy sector (-0.4%) was the lone holdout and ended the year with a 37.3% decline.

Unsurprisingly, the market wasn’t bothered by Senate Majority Leader McConnell saying that the $2000 stimulus checks (an increase from $600) have “no realistic path” to quickly pass in the Senate. It could be taken up in the new Senate in January, but that’s an issue for the new year.

The 10-yr yield declined one basis point to 0.92%, leaving it down 100 basis points for the year.

It’s also worth mentioning that the S&P 500 ended the year with a 16.3% yearly gain, which was more than the Dow (+7.3%) but less than the Nasdaq (+43.6%) and Russell 2000 (+18.4%).

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S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. It is not possible to invest directly in an index.

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