By: Caley Perleberg, CFA, AVP Trust Portfolio Manager I

Recap: So long 2020

Heading into 2020 the U.S. and global economy was humming along. The U.S. unemployment rate was near historic lows, backed by a supportive Federal Reserve. The stock and bond markets were coming off an excellent 2019. The main risk factors were the U.S.-China Trade War and the upcoming U.S. elections. With low inflation and employment, it was a true “Goldilocks” environment.

*Source: U.S. Bureau of Labor Statistics

Then we all had our lives flipped upside down with the biggest pandemic in over 100 years. The swiftness in the spread, fatalities and damage caused by COVID-19 was staggering. In the First Quarter of 2020, the markets and economy collapsed, with the stock markets falling 30% in a matter of a month, and GDP contracting at a record pace. Over 21M jobs were lost in the U.S. alone. Global governments and central banks stepped up with *Source: U.S. Bureau of Labor Statistics unprecedented measures and support to combat the damage inflicted by the virus. With this support and renewed optimism of an economic re-opening, markets rebounded over 20% in the Second Quarter. They kept rolling in the Third Quarter spurred by a recovering jobs market and global Central Banks reiterating their monetary support. The equity market rally continued in the Fourth Quarter on the back of the breakthrough the world had been waiting for, a vaccine. Small-cap stocks (as measured by the Russell 2000), which had trailed their Large-cap counterparts for years, surged over 20% for the quarter. The good news is that the latter part of the market rally has been more broad-based, as the early recovery was largely led by a handful of big technology stocks. 

Benchmark Returns

As you can see on the left, the 4th Quarter produced sizable gains, propelling year-to-date returns even higher. The S&P 500 added 18.4% for the year, while the Russell 2000 led all major indices, gaining 20.0%. International Emerging Market stocks were up 18.7%. Looking at fixed income, the Bloomberg Aggregate Bond Index has gained 7.5% in 2020, while High Yield Bonds, after falling significantly earlier this year, netted a 7.1% return.


*Source: Fidelity

*Source: Fidelity

Looking at the business cycle graph below, the U.S and most large Developed countries have emerged from the COVID-induced recession are now solidly in the Recovery Stage. The pace of each recovery varies, and the FWBT Investment Committee will continue to strategically adjust our portfolios to take advantage of market opportunities.

Our views which make us constructive on the markets:

  •  If vaccines are accepted and distributed quickly, U.S. GDP could return to normal levels by early 2022
  • The U.S. unemployment rate will continue to fall but will remain elevated when compared to pre-COVID levels
  • Global Central Banks will remain supportive, meaning suppressed interest rates and a challenging market for yield seekers
  • Inflation will remain below the Federal Reserve’s target of 2%, but will actually rise when compared to 2020 levels (which dropped precipitously with the shutdown)
  • The U.S. consumer, which makes up nearly 70% of our GDP growth, will drive the recovery with pent up demand and a savings rate that has increased 120% since 2019
    •  This, in turn, should help corporate earnings recover (stock prices follow earnings)

*Source: JPMorgan

Of concern:

  • A delayed vaccine rollout slows down the pace of the economic recovery
  • Ballooning government deficits will eventually have to be addressed.
  • Over the long-term debt is a drag on economic growth (in 2020 debt was 100%+ of GDP)
  • Consumers don’t spend as much as expected and corporate earnings do not recover as quickly as hoped
    • If so, market valuations will remain elevated/stretched
  • Too much market exuberance. Be fearful when others are greedy, be greedy when others are fearful

Asset Allocation Views

For many of the reasons discussed, within our managed portfolios we are constructive on Equities and Alternative Assets. While Fixed Income provides an anchor in many of our portfolios, the current environment is challenging.

“Given that we are in the early part of this recovery, we believe taking a measured, risk-on approach is appropriate and reasonable.”

In Closing

The market rollercoaster of 2020 exemplified that portfolio diversification and discipline works. With virus and political headlines dominating the news cycle, it’s only human to overreact. The FWBT Investment Committee takes an objective and balanced approach when constructing portfolios. We look at short-term opportunities to add value, while at the same time have a long-term perspective when making portfolio changes.

2020 has been a trying and stressful year for everyone. Perhaps this is a good time to review your overall asset allocation and retirement roadmap. In addition to offering professionally managed and actively monitored portfolios, the FWBT Trust Department urges clients and prospects to visit with us about our complimentary financial planning services. We can help provide a clearer and detailed picture of your financial profile.

The FWBT Trust Department is here to help navigate you through these turbulent times. If you have any questions, please reach out to your local Trust Officer or Trust Representative.
So goodbye to 2020, here’s to brighter days ahead. Stay safe and Happy New Year!


This document is for informational purposes only. They do not take into account the exceptions and other considerations that may be relevant to individual situations. The information provided should not be construed or used as legal or tax advice, which has to be addressed to particular facts and circumstances involved in any given situation. The information provided should not be interpreted or used as a specific recommendations for any client of FWBT. It is not intended as an offer or solicitation of an offer, to buy or sell any security or financial instrument, nor does the information provided constitute advice or our view as to whether an asset is appropriate for you and your financial objectives. The outlook and allocation views reflect subjective judgments and assumptions, and there can be no assurance that developments will transpire as discussed. Past performance is not a reliable indicator of future results. The opinions expressed are those of FWBT’s Investment Management Team, and FWBT shall not be held liable for any content or information contained in this piece. Investors should seek financial advice regarding the suitability of any asset or strategy discussed. Investing involves risks, including the possible loss of principal and change in value. Index performance is shown for illustrative purposes only.