Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

December 2020 Market Wrap: Modest Gains After A Huge Year. What's Next?

By (Charley Blaine/ MarketsJan 04, 2021 08:16
December 2020 Market Wrap: Modest Gains After A Huge Year. What's Next?
By (Charley Blaine/   |  Jan 04, 2021 08:16
Saved. See Saved Items.
This article has already been saved in your Saved Items

For pure drama this past year, it was hard to beat the performances of global financial markets. Except possibly via the U.S. presidential election and its aftermath.

December 2020 produced modest gains, compared with the huge rallies in April and November: 3.3% for the Dow Jones Industrial Average (INDU), 3.7% for the S&P 500 Index (SPX) and 5.7% for the NASDAQ Composite (COMPX).

The December performances were good enough to let the Dow and S&P 500 achieve record closes at year-end: 30,606 for the Dow and 3,756 for the S&P 500. The NASDAQ's year-end close of 12,888 was just 11 points below its all-time closing high of 12,899, set on Dec. 28.

For the year, the Dow added 7.25%, with 16.3% for the S&P 500.


The NASDAQ soared a whopping 43.6%—its best performance since 2009's 43.9% rebound from the traumatic market crash of 2008.

COVID Risk, Market Froth Still In Play

However, to get these 2020 results, markets had to weather another trauma: the COVID-19 pandemic, which has infected millions and caused more than 350,000 deaths across the U.S. and at least 1.8 million deaths around the world, then claw their way higher. A concern is that froth in the stock market as 2020 opened hasn't gone away.

There is hope that the development of new vaccines to fight the virus will reduce caseloads and deaths and boost economies around the world. But 2020's stresses, including from the U.S. Presidential election, may find some investors exhausted.

As the pandemic first emerged from Asia in the winter of 2020, governments locked down whole populations, especially in Europe and parts of the United States.

Markets panicked in response. The S&P 500 fell 35.4% between its closing high on Feb. 19 until bottoming on March 23. Since then, the index is up 71.4%. (For perspective, it took 17 months for the S&P 500 to fall 56.8% between its October 2007 top and its March 2009 bottom.)

Oil prices cratered. West Texas Intermediate, the U.S. benchmark, fell under $20 a barrel for the first time in years and even went negative for a day in April. WTI did not cross $40 again until July. While prices rose nearly 27% in November and 7% in December, its $48.52 close on Friday was still off 21% for the year.

Baker Hughes' U.S. rig count was hovering around 800 in the first quarter of 2020 as the panic set in. The count plunged to 244 in mid-August. While the count is now at 351, it is still down 55% from March.

Because of the economic panic, Federal Reserve and central banks around the world cut interest rates and tried to boost available credit. Governments, with middling result, hurriedly tried to enact stimulus packages.

The widely watched U.S. 10-year Treasury yield fell from 1.92% at the end of 2019 to 0.92% on Thursday. (It was 2.47% on Jan. 20, 2017, the day Donald Trump was sworn in as President.)

The Fed may not boost its key rates until 2022 or later because of the overall weakness in the U.S. economy. The November unemployment rate was 6.7%; the first report on December is due Friday. Jobless claims totaled 787,000 in the week of Dec. 20 after reaching nearly 7 million in March. However, before the pandemic erupted, jobless claims were running at about 200,000 a week.

Lots Of Opportunity, Plenty Of Losses Too

The pandemic, however, created lots of opportunity for companies targeting customers not affected by layoffs. These include:

1. Developers of coronavirus vaccines. It's the small companies whose shares emerged as winners. Pfizer (NYSE:PFE) finished the year up just 6%. AstraZeneca (NASDAQ:AZN), the British pharma giant, was up 0.3%.

The reason for the dichotomy is that Big Pharma has a ton of drugs in the market and more in the pipeline, but pricing power doesn't attach for their drugs. But U.S. shares of BioNTech (NASDAQ:BNTX) Pfizer's German partner in the development of the vaccine, jumped 140%.

Moderna (NASDAQ:MRNA), the biotech whose own vaccine has won U.S. approval, surged 434%.


Novavax (NASDAQ:NVAX), another biotech developing a coronavirus vaccine that's just begun phase 3 trials, was up an astonishing 2,702%.

2. Tesla. Tesla (NASDAQ:TSLA) was in a world by itself. Shares of the electric vehicle maker finished the year up 743%, tops in both the NASDAQ 100 index and the S&P 500 index.

Elon Musk's company delivered nearly 500,000 new vehicles to customers in 2020. Profitability appears to be stable, and Tesla was rewarded with membership in the S&P 500 in December. It has a market cap of $669 billion, nearly twice as large as Toyota (NYSE:TM), Honda (NYSE:HMC), General Motors (NYSE:GM) and Ford (NYSE:F) combined. That included gains of 24% in December and 46% in the fourth quarter alone. It appears to be a must-have stock, even if it is selling at 1,398 times trailing 12-month earnings.

3. Online retailing stocks. These stocks took off. Many shoppers, trying to avoid exposure to the virus, ordered online. (NASDAQ:AMZN) has said it expects fourth-quarter sales of $112 billion to $124 billion. Target (NYSE:TGT) and Walmart (NYSE:WMT) have also reported higher online sales in the summer and fall.

TGT Weekly TTM
TGT Weekly TTM

Target shares jumped 18% in November alone and ended the year up 37.7%. Walmart added 21%.

4. Online package shippers. FedEx (NYSE:FDX) was a big beneficiary of the online boom. Shares jumped nearly 72% during the year, 20th among S&P 500 stocks and first among stocks in the Dow Jones Transportation Average. Rival United Parcel Service (NYSE:UPS) added 43.9%. Railroad stocks also did well, especially in the second and third quarters.

5. Online service companies. Etsy (NASDAQ:ETSY), the online marketplace targeting crafters, was up 300%, in part because it joined the S&P 500 in September. DoorDash (NYSE:DASH), which provides food-delivery services, went public on Dec. 8 at $102 and hit $195 in its first day of trading. The shares have pulled back but appear to have stabilized above $140, up about 40%.

Airbnb (NASDAQ:ABNB), which operates a vacation online marketplace, went public on Dec. 10 at $68, indicating a market value of $100 billion. The shares jumped to nearly $175 but have pulled back to $146.80 on Friday, up 116% in its first month of trading. Online real-estate brokerage Zillow (NASDAQ:ZG) rose 47%.

6. Traditional big tech. Apple (NASDAQ:AAPL) rose 81% because investors like its prospects with 5G phones. Its profit stability add safety to the downside risk. The stock has acted as a safe haven in the pandemic. Advanced Micro Devices (NASDAQ:AMD) basically doubled. Graphics chip maker Nvidia (NASDAQ:NVDA) rose nearly 122%. Amazon finished up 76% and Microsoft (NASDAQ:MSFT) was up 41%.

7. Metals stocks. These have been rising as hopes have built that the emergence of effective vaccines for COVID-19 will lead to a strong global economic rebound.

FCX Weekly TTM
FCX Weekly TTM

Freeport-McMoRan Copper & Gold (NYSE:FCX) was up 98% as copper, its main product, jumped more than 25% to $3.519 a pound.

Gold, the classic safe-haven investment, jumped 24% to $1895.10 an ounce. Silver was up 47%. Aluminum maker Alcoa (NYSE:AA) fell 71% in the first quarter because of the virus but has recovered all those losses. While it ended the year up 7.2%. It was up 98% in the fourth quarter.

Among the losers remain companies directly smashed by the corona virus. These include:

1. Energy companies, especially oil & gas producers. These finished the year substantially lower, although the rebound in oil prices in the latter half of the year did boost the stocks.

XOM Weekly TTM
XOM Weekly TTM

Exxon Mobil (NYSE:XOM) fell 46% in the first quarter. It also suffered the humiliation of being removed from the Dow after 82 years. But it did rise 41% in the fourth quarter.

Occidental Petroleum (NYSE:OXY) slumped 58% for the year. But with oil prices moving higher, the shares were up nearly 10% for December and 73% for the fourth quarter.

2. Airlines. Airline shares have been pummeled by the pandemic as well as the fallout from the problems with Boeing's (NYSE:BA) 737 MAX because people won't travel if they don't have to.

Even if the economy puts in a strong recovery and vacation travel picks up, business travel is likely to be slow in recovering because face-to-face meetings can be held on Zoom or Microsoft Teams. But some carriers, notably Alaska Airlines (NYSE:ALK) and Ryanair Holdings (NASDAQ:RYAAY), have put in new orders for the 737 MAX planes, now that regulators have recertified the aircraft.

Their hope: people cannot wait to travel again. Alaska shares saw modest gains in December but shot up 41% in the fourth quarter as investors increased their bets for a recovery.

3. Boeing. The aerospace giant has seen its order book collapse. As the year closed, there were hundreds of 737 MAX planes parked on tarmacs all over the U.S. West awaiting the plane's recertification.

For the Chicago-based company, the pandemic has made an awful situation worse. True, Boeing shares were up 1.6% in December on top of a 46% gain in November, but they are still down 34% on the year and down 52% from their all-time high of $446.01 in early 2019.

What's Next?

Assuming people get COVID-19 and flu shots, life may start to look more like what it was pre-pandemic. Which means more consumer spending, better jobs numbers and continued strength in residential real estate markets in the United States and elsewhere.

The Federal Reserve does not want to raise interest rates any time soon. Probably not before 2022.

All this is good for stocks.

A big risk is that the bond market may push interest rates higher anyway because of gargantuan amounts of debt governments have had to take on to fight the virus. Watch the 10-year Treasury yield. It has been inching back toward 1% because investors are beginning to move money out of the United States into other markets.

That also pushed the dollar lower, which means import prices may start to rise, adding inflationary pressures to the economy. The U.S. Dollar Index, which tracks the dollar against a basket of currencies, fell 6.4% in 2020 overall but 12.7% after peaking in March.

As well, one must keep an eye out for markets getting pricey. The relative strength index for the NASDAQ is currently above 70, a warning that stocks could be getting overheated. Not far behind, the levels for the Dow, S&P 500 and the NASDAQ100 were all just below 70 on Friday.

December 2020 Market Wrap: Modest Gains After A Huge Year. What's Next?

Is Apple Undervalued?

Based on 15 different premium valuation models, we calculate whether Apple stock is undervalued or overvalued every day. If you are considering Apple for your portfolio, you need to check this out:

See Fair Value Now
Unlock Apple's unbiased fair value with InvestingPro+

Related Articles

December 2020 Market Wrap: Modest Gains After A Huge Year. What's Next?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email