January 2021 Student of the Market

Aaron Ammerman |

Attached as a PDF below is the January 2021 Student of the Market Piece.  This piece is produced monthly by BlackRock to showcase significant trends in the market.  This particular issue shares information about the stock market returns, the stock market risk, stocks after the rebound, flow divergence, and inflation in investments.  

Historic Returns Over the Past Two Years

The returns on stocks in 2019 were 31.5% and in 2020 they were 18.4%.  The returns on bonds in 2019 were 8.7% and in 2020 they were 7.5%.  We’ve only seen 4 other time periods with back-to-back calendar years of returns for stocks above 16% and bond returns above 7% since 1926.  This is monumental!


Highest Volatility Since the Financial Crisis

This graph shows the number of single day stock market returns of +/-2% or more.


U.S. Large Cap Funds Getting Riskier

This bar chart shows the volatility profile of all U.S. large cap stock fund assets.  It signifies the 15-year standard deviation of all U.S. large cap equity mutual fund and ETF assets relative to the S&P 500.


Largest Stocks Contributed the Most in 2020

Not all stocks within the S&P 500 are the same.  This bar chart shows the average YTD performance of individual companies in the S&P 500 Index, grouped by market cap through 12/31/20.


Historic Divergence between Equity Mutual Fund and ETFs

This shows the calendar year flows in all equity mutual funds versus ETFs.  In 2020, the equity mutual funds ended at -$437 billion and the equity ETFs ended at $185 billion.   


A Diversified Portfolio Can Work Even Though it Never Feels Good

Diversification can work even when it feels like it's losing.


Asset Class Correlation with Inflation

This graph shows the correlation of select asset classes to inflation.  It is a 20-year correlation with U.S. BLS CPI (ended 11/30/20).