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HERE ARE THE LATEST trends in the world of investing:

  • The S&P 500 climbed 16.3% in 2020, more than recouping the 34% loss suffered during the five-week bear market that began in mid-February. These figures don’t include dividends. Despite the big stock market gains of the past 11 years, the shares in the S&P 500 remain just 146% above their March 24, 2000, peak—a modest gain over a turbulent two-decade stretch.
  • Amid 2020’s rollercoaster ride, the winners and losers resembled those of recent years: U.S. growth stocks fared better than value shares, while developed foreign markets and emerging markets once again lagged behind U.S. shares. Still, toward the end of the year, there were signs that this pattern was breaking down, with value stocks and international markets picking up steam. A reason for the improved performance of overseas markets: The dollar weakened in the foreign exchange market, helping to bolster the value of foreign stocks for U.S. holders.
  • Treasury bond prices rose and yields fell sharply in 2020, with the benchmark 10-year Treasury note yielding 0.92% as of Dec. 31, down from 1.92% a year earlier. In early August 2020, the 10-year yield hit a record low of 0.52%.
  • The Federal Reserve slashed short-term interest rates in 2020, as it sought to prop up the slumping economy. One consequence: One-year Treasury bills were yielding just 0.11% as of Dec. 31.
  • Real assets had mixed performance in 2020. Oil prices plummeted early in the year but finished 2020 at $48 a barrel, down from $61 a year earlier. Real estate investment trusts fell hard during 2020’s bear market, before partially recouping their losses during the strong rally that followed. Meanwhile, the standout performer was gold, which stood at $1,902 as of Dec. 31, up from $1,520 at year-end 2019.
  • In December, the Federal Reserve projected that the U.S. economy would grow 4.2% in 2021, after shrinking 2.4% in 2020. What about unemployment? The Fed expects it to finish 2021 at 5%, while core inflation runs at 1.8%.
  • As of 2019, 52.6% of U.S. families were invested in the stock market, up from 51.9% three years earlier, but below the 53.2% peak recorded in 2007, according to the Federal Reserve’s Survey of Consumer Finances. The survey is conducted every three years.

Want to get a handle on stock and bond market valuations? Check out the chapter on financial markets.

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