In focus

Election 2020: the year in US markets


The year 2020 began with the US stock market at an all-time high and many investors suspecting that US shares were too expensive.

Within weeks, though, everything would change.

The emergence of Covid-19 in Asia was largely ignored by US equities in January and February. But in March, as the global scale of the pandemic became apparent, a series of steep falls erased more than a third of the value of the S&P500. Not for long.

As the chart below shows, the following months brought about an astonishing rebound, pushing the US’s tech-heavy index back to January highs and then far beyond. In August 2020 – one of the best Augusts in US stock market history – the value of Apple rose above $2 trillion, just one of many records smashed in an extraordinary year.

During the period coronavirus cases in the US grew explosively, then tailed off from mid-July through August, only to start climbing again as a second wave of infections took hold into September.

Covid-19 and the response to the pandemic has hobbled some industries and caused others to prosper.

Market volatility has been a constant. In the weeks ahead of 3 November polling day, we have seen market turbulence caused by fears of renewed lockdowns, by disappointment over apparent failures in vaccine development – and notably by the diagnosis of President Trump’s own Covid-19 infection on 3 October.

2020: Twenty US market milestones in an election year

S&P500

US_elections_chart1.png

Past performance is not a guide to future performance and may not be repeated. SOURCE: Refinitiv Datastream

  1. 1 January

US markets open year at all-time high: S&P500 at 3,245

  1. 21 January

Centre for Disease Control and Prevention confirms first US Covid-19 case

  1. February

US recorded cases of Covid-19 remain below 100

  1. 8 March

Saudi Arabia sparks an oil price war as Moscow refuses to lower oil prices as the Covid-19 slump emerges

  1. 9 March

US markets fall 8%, as anxiety about pandemic intensifies

  1. 11 March

World Health Organisation declares the Covid-19 outbreak a pandemic

  1. 12 March

US markets fall further 10%

  1. 13 March

US bans flights from Europe

  1. 16 March

US markets fall further 13%

  1. 23 March

US markets bottom with the S&P500 at 2,191 (33% down on the start of the year)

  1. 27 March

The $2 trillion US fiscal stimulus package is passed

  1. 1 April

US recorded cases of Covid-19 exceed 1 million during April

  1. 20 April

US oil prices turn negative as storage costs exceed market value

  1. 4 June

European Central Bank announces a further €600 billion stimulus, bringing total Covid response to €1.35 trillion

  1. 11 June

Markets fall 7% as fears of a second wave take hold

  1. July

US second quarter GDP falls by annualised 32.9%

  1. August

August sees US stocks rise almost 7% – the best August performance since the 1980s

  1. 20 August

The market capitalisation of Apple exceeds $2 trillion

  1. 2 September

Stock market peaks: S&P500 reaches 3,588 – some 64% higher than its March trough

  1. 3 October

President Trump tests positive for Covid-19

 

Tech has led the charge

The big contributors to US equities’ resurgent performance in 2020 have been the tech giants.

By the end of September, the S&P500 had returned over 5%. Subtract the contribution of the “FAMAGs” – that’s Facebook, Amazon, Apple, Microsoft and Alphabet (Google’s parent company) and the index ended September 3% lower than at the start of the year.

Election year 2020: shaping up to be another year in which US equities outperform other regionsUS_elections_chart2.png

Past performance is not a guide to future performance and may not be repeated. Source: Refinitiv Datastream, MSCI and Schroders. Data to 30 September 2020 in US dollars. Europe = Europe ex UK.

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