Making sense of the markets: a look back at 2020  

2020 hindsight

We were all more than eager to put 2020 in the rearview mirror. It was a year that played out as part pandemic horror movie, and part political thriller with the contested U.S. election that refused to offer “The End.” 

And just when you thought that things could not get any “curiouser,” along comes 2021 and the President Trump supporters who stormed (and briefly took over) the Capitol Building in Washington, DC, on Jan. 6, the day Congress confirmed the 2020 presidential and vice-presidential election. 

How did the stock markets respond? They were back to their most impressive trick of 2020: shrugging off bad news. On Wednesday, the Dow Jones Industrial Average rose 437.8 points, or 1.44%, to 30,829.4; the S&P 500 gained 21.28 points, or 0.57%, to 3,748.14; and the Nasdaq Composite dropped 78.17 points, or 0.61%, to 12,740.79. The S&P/TSX Composite Index closed up 145.60 points, or 0.82%. 

The markets have been consistent from November in that they have not taken seriously Trump’s challenge of the 2020 election results. In fact, U.S. and Canadian stock markets ended 2020 at all-time highs. 

But we’re getting ahead of ourselves. This week’s column is a look back at key market events of 2020—and an attempt to make some sense of them. 

Canadian banks took a back seat

I began this weekly column on July 12, 2020. In that post, we looked at Canadian banks that were forced to hold their dividends due to the pandemic. They were also not allowed to buy back shares. From that post… 

“Since 1957, Canadian bank returns were positive in about 73% of the years and have outperformed the TSX index in approximately 67% of the years.”

Canadian banks are perpetual outperformers over the longer term. But 2020 was a year when the banks certainly did not outperform the market. The big banks as a group were up 4.4% for the year, while the TSX composite was up 5.6%. And that was largely thanks to the stellar performance of Shopify that lifted the Canadian indices. 

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