Markets Remained Resilient In 2020 – Equity Overview

Equity markets rebounded from the lows in March 2020 to the end of the year, driven by vaccine optimism, low interest rates, and continued stimulus funding.

Margin loan balances increased during the pandemic, eclipsing $722 billion through November and surpassing the previous high of $668 billion in May 2018, as reported by the Financial Industry Regulatory Authority.

Despite headwinds from the pandemic, global equity markets were resilient for the most part, ending the year with favorable returns. Growth and momentum led the way, with the technology and consumer discretionary sectors rising the most.

The steep COVID-driven selloff in March and the subsequent recovery by August were of historic proportions, with unprecedented rebounds across nearly all sectors of the equity markets in 2020. (Sources: FINRA, Bloomberg)

Rates Held Steady Throughout 2020 – Fixed Income Update

Rates remained near historic lows throughout 2020 as ambitious efforts by the Federal Reserve and the Treasury ensured liquidity in the fixed income markets.

Key rates fell across the board in 2020, as accommodative monetary and fiscal policy initiatives contributed to a low-rate environment. Mortgage rates fell to new lows in 2020 a dozen times according to Freddie Mac weekly data, triggering a flurry of refinance activity throughout the year.

The U.S. Treasury yield curve steepened toward the end of 2020, an indication to economists that inflation is expected to increase. The yield on the 2-year Treasury fell to 0.13% as the yield on the 10-year Treasury rose to 0.93 % in December, pushing short-term yields lower and sending longer term yields higher. Economists and market analysis view a steepening yield curve as validation that economic expansion is a promising possibility. (Sources: Treasury, Freddie Mac, Federal Reserve)

Workers Hesitant To Quit During Pandemic – Worker Confidence

Confidence among workers to freely quit and leave their current job has historically been an indicator of the condition of the labor market. As COVID-19 took its toll on the economy, with layoffs increasing, workers were less likely to depart their jobs due to fear that they might not be able to find another position.

The Department of Labor tracks voluntary job exits, also known as quits, which are considered very different from layoffs and work reductions. Fewer workers quitting reduces wage increases, as employers often maintain wages for workers not confident enough to quit. (Source: Department of Labor)

Grocery Store Sales Take Off In 2020 – Consumer Behavior

As local and state governments implemented restrictions on restaurant dining, consumers instead headed to grocery stores. Grocery stores witnessed an immediate surge in customer purchases as news about restaurant closures and dwindling inventories of toilet paper and other essential items dominated headlines on social media and television.

Various products, from frozen foods to toilet paper, experienced steep increases in sales as the pandemic set in. Not only did demand for such products increase, but so did prices, allowing many food-related companies to maintain profit margins.

Many economists expect the shift to grocery stores by consumers to potentially have lasting effects, changing the way consumers feed themselves. (Source: Federal Reserve Bank of St. Louis)

Ability To Work From Home Tied To Income – Labor Market Update

As stay-at-home mandates came into effect throughout the country, companies scrambled to migrate their management teams and employees to home offices. Data tracked by the Labor Department revealed that high-income positions, which include management and technology jobs, were most likely to shift to home offices. Data also revealed that lower-paid employees were the ones often did not have the ability to transition to work-from-home status, since many lower-income jobs are located in sectors that require in-person employee presence.

Analysts expect that many of the companies that transitioned employees home temporarily may eventually decide to make some of the transitions permanent. The shift in workplace dynamics that occurred in 2020 was substantial, potentially producing persistent changes for years to come.

Source: Department of Labor