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.

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.