Global Equity Weekly

December 18, 2020 | 16:33

2020 Recap: Bears on Mute

Economist

Director and Senior Economist
Economics

Robert has been with the Bank of Montreal since 2006. He plays a key role in analyzing regional economic, fiscal... (Read more)

Robert Kavcic

Director and Senior Economist
Economics

Robert has been with the Bank of Montreal since 2006. He plays a key role in analyzing regional economic, fiscal... (Read more)

With this the last edition of Global Equity Weekly for the year, here is a look back at some of the big movers in 2020, both good and bad.

The Nasdaq was the big winner, up more than 40% on the year as we head into the home stretch. This has been discussed at length, but many of the heavyweight names in the technology-led index directly or indirectly benefited from the pandemic. Note that the 5-year annualized return sits at a tidy 19% and the 10-year return a neat 17%.

IPOs were also hot, with the largest number of new offerings since 2014. Names like Airbnb, DoorDash and Snowflake garnered much interest and saw strong opening price action. But, despite comparisons to 1999, the crop generally has more seasoned businesses to fall back on.

Consumer discretionary stocks also thrived this year given the pandemic and associated shift in spending toward durable goods. The sector is next in line behind technology on the year in the S&P 500, pushing returns in excess of 30% (more than twice the gain for the broad index). Communications services similarly benefited.

Table 1 - Market Performance

Source: BMO Economics, Bloomberg

While the winners this year rose in a big way, the list of areas of the market that struggled runs quite a bit longer. In general, the smaller you move down the size scale, the tougher the year it became. Indeed, this is a major theme of 2020 that correlates with the bigger and more lasting economic impact at the Main Street level. S&P 100 large caps posted almost twice the gain of S&P 600 small caps.

Banks also took a heavy beating this year, with direct exposure to the small business and commercial real estate sectors. The group is currently down 21% in the U.S., but has managed to scrape back most of the early-year losses in Canada, down just 1.8% on the year. A steeper yield curve has helped later in the year, and could provide further relief in 2021.

All in, however, energy was the biggest drag in 2020, with WTI oil prices infamously turning negative at one point. The sector is still down 36% in the U.S and 29% in Canada, despite a solid rally in WTI pushing $50 this week.

With that sector backdrop, the TSX was dealt a difficult hand simply resulting from its composition—that is, a heavy weight in banks and energy, but light representation from technology. The index is up just 2.8% on the year, which is not a bad deal considering what we’ve dealt with in 2020, but it lags well behind the 14.8% jump in the S&P 500.

That said, Canadian stocks still sat above harder-hit indices in France and the U.K. The latter are also heavy in financials, but also had the overhang of a tougher virus backdrop and ongoing Brexit drama.

Finally, the top region of the year on our major-market leaderboard was… China (up 22%). The country where this all originally began.

North American Sector Performances

(% change over period)

Table 2 - S&P 500 Sector Performance

Source: BMO Economics, Bloomberg

Table 3 - TSX Sector Performance

Source: BMO Economics, Bloomberg

TSX Relative Sector Performance

(relative to the index, year-ago = 100; dashed line = 200-day m.a.)

S&P 500 Relative Sector Performance