2020 in Review: Recapping a Tumultuous Year

By on January 6, 2021

To say that 2020 was a chaotic, emotionally draining year would be a profound understatement. This has been an incredibly difficult year for so many people, in so many respects. Our hearts go out to those whose families have lost loved ones and to those who have suffered — through no fault of their own — from the economic havoc the COVID-19 pandemic has inflicted. Through this painful and sometimes divisive time, we continue to have faith in the inherent good nature of people, as well as the resilience and entrepreneurial energy behind the U.S. economy. While we are presently enduring surge upon surge of infections, hospitalizations, and deaths, we finally see light at the end of the tunnel and are buoyed by welcome images of medical personnel and seniors receiving vaccinations.

Financial markets went to extremes in 2020, testing investors’ resolve to a degree not seen since the Global Financial Crisis of 2007-2009.  As the world began internalizing the far-reaching implications of the pandemic, the stock market tumbled in late February and the first three weeks of March.  But equities then staged one of the quickest rebounds ever, propelled by unprecedented support from the Federal Reserve and U.S. government.  The rally was reinvigorated in the fall by positive news about the efficacy and accelerated rollout of multiple COVID-19 vaccines and investor relief over the end of a polarizing U.S. presidential election.  A broad range of asset classes participated in the run-up, with most major indices moving into positive territory by year-end.  Overall, the S&P 500 Index returned 18.4% for the year, but the market rebound was not limited to large U.S. companies’ shares.  The Russell 2000 index of small U.S. stocks, which is heavily reliant on the outlook for growth in the U.S. economy, climbed more than 18% in November alone, finishing the year up 20%.  Foreign markets also staged a late comeback but continue to trail their U.S. counterparts by a sizeable margin over the last several years.

Asset class returns for the quarter and full year were as follows:



Asset Class

Fourth Quarter 2020

Full Year 2020

Barclays U.S. Govt./Credit—Int. Fixed Income 0.5% 6.4%
S&P 500 Large U.S. Stocks 12.1% 18.4%
Russell 2000 Small U.S. Stocks 31.4% 20.0%
MSCI ACWI ex-USA Foreign Stocks 17.0% 10.7%
S&P Global REIT Real Estate Securities 12.5% -9.1%

As the stock market surged, a prevalent media theme was the disconnect between “Wall Street” and “Main Street.”  Indeed, the U.S. economy continues to struggle from the direct and indirect consequences of the COVID-19 pandemic.  The job market remains unsteady, and both the public and private sectors have taken on enormous amounts of pandemic-driven debt.  This narrative echoes throughout developed economies worldwide, as many governments have reinstated economically painful lockdowns to slow the pandemic until vaccines can be widely administered.

When the calendar turns from December to January, it is often accompanied by lists recapping events of the past year and forecasting what may lie ahead.  As our long-time clients know, we try to stay out of the short-term forecasting business, but we are always ready and willing to employ our hindsight and remind you of what has already transpired to make some sense of past occurrences.

So, in no particular order, here is our list of…

The Top Remarkable Investment Events of 2020

Interest rates fell to historic lows.

As we began 2020, the 10-year U.S. Treasury yield sat just below 2%, and many market strategists predicted rates were poised to stay steady — or gradually rise.  Instead, the 10-year yield declined quickly throughout the year, dipping as low as 0.54% on March 9 and finishing the year just below 1%.  As a result, investment-grade taxable bonds generated respectable total returns on the year, typically in the 4% to 7% range depending on maturity and credit quality (as market interest rates decline, current bond values typically rise).  As market interest rates fell, mortgage rates also plunged — average 30-year mortgage rates fell below 2.75% for conforming loans — and many homeowners rushed to refinance their loans.

Oil prices fell dramatically.

As recently as 2014, a barrel of U.S. crude oil was trading for well over $100.  Crude oil fell to $20 per barrel in March 2020, its lowest price since 2002, driving gas prices downward at a time when road traffic was minimal.  Today, that same barrel of oil is below $50, and drivers in many parts of the country are paying less than $2 for a gallon of gas.  The primary causes of the precipitous collapse in oil prices were sharply reduced global demand during the pandemic and the price war between major oil producers Russia and Saudi Arabia.  The drop in crude prices has provided some relief to middle-class Americans at the pump, but countering that positive effect is the adverse impact on economic output and American jobs now that the U.S. has shifted from an oil consuming nation to the world’s largest producer of oil.

Small company U.S. stocks showcased amazing resilience.

During the depths of the COVID-19 downturn in mid-March, U.S. small company stocks (as measured by the Russell 2000 total return index) fell about 40% from the start of the year, only to surge nearly 100% from mid-March lows to the end of the year.  U.S. small company stocks significantly trailed U.S. large company stocks year-to-date until a sudden rise in mid-November pushed small caps ahead.  In a year where smaller companies had been hit the hardest by the pandemic and many large companies were the benefactors, it was difficult to see this one coming.

S&P 500 total return level percentage change compared to Russell 2000 total return level percentage change from January 1, 2020 to December 31, 2020

Market timing proved to be incredibly difficult (yet again).

History may point to 2020 as a case study for disciplined investing and the daunting task of correctly timing the market.  In the spring, investor fear was at levels not seen since the Global Financial Crisis of 2008-2009.  Many investors watched their stock-oriented portfolios fall 20% to 30% in just a five-week period (February 19 to March 23).  Those with the fortitude and discipline to refrain from making any drastic moves were rewarded with the quickest market rebound in history, and then some.  As we have said before, trying to time entry into, and exit from, the stock market is generally very hazardous to one’s financial health.  Stock prices sometimes move quickly and in mysterious ways.  Over long periods, market returns are closely tied to economic fundamentals such as growth and corporate profitability, but many other factors can introduce “noise” and distort the picture in the short-term.  The pandemic was certainly unexpected, but then again, so are most market-moving events.  The timing and magnitude of these other factors, such as geopolitical events and investor psychology, are inherently unpredictable and therefore nearly impossible to act on.

We do not know and will not make any guesses regarding what might come to pass in the coming year, although it is hard to imagine a more dreadful and difficult year than 2020.  Even the most well-informed market watchers and economists would have failed miserably to forecast the most important changes in the investment landscape over the last 12 months.  We continue to firmly believe that the best remedies to an uncertain world are appropriate asset allocation, broad diversification, disciplined rebalancing, and cost minimization.

Dowling & Yahnke is Having a Birthday

In a few months, Dowling & Yahnke Wealth Advisors (D&Y) will celebrate its 30th anniversary.  In May 1991, Mark Dowling and Dale Yahnke formed our firm to serve investors, free from the prevailing brokerage model’s inherent conflicts based on commission-based product sales.  In contrast, D&Y would provide independent, objective advice with a simple and transparent fee structure.  From the early days, our firm has been focused on providing its clients with tax-efficient, broadly-diversified investment portfolios tailored to their specific needs.

As we celebrate this major milestone in our history, we reflect on how the firm’s principles and investment philosophy have helped clients successfully navigate the financial market’s ups and downs.  Over the past 30 years, the global stock market has weathered a multitude of geopolitical and financial crises.  In every case, it has recovered and continued to grow despite bouts of volatility along the way.  In the graph below, for this 30-year time period we highlight the growth of $10,000 invested in 1) the U.S. stock market (represented by the Russell 3000 Index which encompasses the broad U.S. stock market including large cap stocks [S&P 500 Index] and small cap stocks [Russell 2000 Index]), 2) U.S. fixed income (represented by DFA Intermediate Govt Fixed Income fund), and 3) the U.S. economy (represented by gross domestic product [GDP]).

for this 30-year time period we highlight the growth of $10,000 invested in 1) the U.S. stock market (represented by the Russell 3000 Index which encompasses the broad U.S. stock market including large cap stocks [S&P 500 Index] and small cap stocks [Russell 2000 Index]), 2) U.S. fixed income (represented by DFA Intermediate Govt Fixed Income fund), and 3) the U.S. economy (represented by gross domestic product [GDP]).

Looking back, D&Y has grown because of the confidence and trust our clients have placed in us as their advisor team.  We greatly appreciate the personal and professional relationships we have built over the last 30 years.  We look forward to strengthening these connections with our clients as well as with the greater San Diego community over the years and decades to come.

Coronavirus Stimulus (COVID-19 Relief Package)

 After nearly half a year of back-and-forth negotiations, Congress passed the much-anticipated second Coronavirus ‘Stimulus Bill’ at the end of December.  The Stimulus Bill is far-reaching in its attempt to provide much-needed financial relief to individuals, families, small businesses, borrowers, certain industry sectors, and state/local governments.  Below is a brief summary of some of the provisions included in the new $900 billion stimulus package:

Benefits for Individuals:

  • Immediate Payments. Some taxpayers will receive a one-time “stimulus” payment in the amount of $600/taxpayer or $1,200/married couple filing jointly (plus $600/qualifying child).  The payment amount is based on 2019 tax return income and may be reduced or phased out completely for higher-income taxpayers.
  • Boost to Unemployment Benefits. Unemployed individuals may be eligible for an additional $300/week for eleven weeks, on top of state benefits, through the middle of March 2021.
  • The Medical Expense Deduction Threshold is set to return to 7.5% of Adjusted Gross Income (AGI). In recent years, the hurdle rate had changed between 7.5% of AGI and 10% of AGI and depended upon a taxpayer’s age.  Now, the 7.5% of AGI threshold for deductions is restored for most taxpayers.
  • New Charitable Deduction. For those who do not itemize deductions, there will be an allowable “above the line” deduction for cash charitable contributions not to exceed $300 for single taxpayers and $600 for married taxpayers.
  • No Cash Charitable Contribution Limits. If you donate cash directly to a charity, the 2021 charitable contribution limitation for individuals will again be 100% of your AGI.  (Note: Donor-advised funds and Section 509(a)(3) supporting organizations are not eligible.)

Benefits for Small Businesses and Nonprofits:

  • Another Round of Forgivable Paycheck Protection Program Loans.  Small businesses and certain nonprofits who experienced at least a 25% decline in revenue in any quarter of 2020 (compared to 2019) may be eligible for a second round of forgivable Paycheck Protection Program (PPP) loans.  Additionally, for those businesses who did not receive a loan under the first round Paycheck Protection Program, the ability to apply for “round one” will be reopened.
  • Deductibility of PPP Loans. After much uncertainty throughout the year, the newly enacted stimulus bill ended the debate on tax deductibility of forgivable PPP loans.  Businesses can now deduct expenses paid with forgivable PPP funds (at least at the federal level), providing much needed clarity for business owners and their tax professionals as tax season arrives.
  • Meal Expense Deductions Return. Sole proprietors and other business owners may be allowed a full (100%) deduction for certain restaurant meal expenses in 2021 and 2022 (but not retroactively for 2020).

The above list is not exhaustive.  We encourage you to reach out to your financial advisor or tax professional to discuss any potential planning opportunities for your specific situation.

Finally, it may be hard to believe, but…

Tax Season is Around the Corner

In mid-February, our clients with taxable accounts can expect to receive Form 1099-Composite, which combines information on interest income, dividend income, mutual fund distributions, and security sales with resulting gain or loss, from your account custodians (e.g., Charles Schwab & Co., Inc.).  We will be coordinating efforts with our clients’ tax preparers to ensure the appropriate information is readily available.  Clients who have changed tax preparers should let us know at their earliest convenience.

As always, we are deeply grateful for the confidence our clients and their trusted professionals have placed in our firm.  We encourage you to call or email anytime you would like to discuss your portfolio or other financial matters.  We wish you the very best in 2021 and look forward to seeing you in-person again when it is safe to do so!


Dowling & Yahnke Wealth Advisors


2020 in Review: Recapping a Tumultuous Year

The Next Recession: Preparing for Uncertainty

Read Now
2020 in Review: Recapping a Tumultuous Year

Singing the Bear Market Blues

Read Now
2020 in Review: Recapping a Tumultuous Year

Mid-Quarter Market Update

Read Now


Discover the people who make Dowling & Yahnke one of San Diego’s top wealth management firm.



Our team is available now to discuss all of your financial goals.