Share prices rose strongly in the US during December, boosted by the news that President Donald Trump had – despite raising many objections – signed into law a coronavirus relief package worth US$900 billion. His last-minute decision narrowly averted a partial government shutdown.
- Infection rates continued to rise
- The US government approved the Pfizer and Moderna vaccines
- Interest rates are expected to remain near zero through 2023
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Share prices rose strongly in the US during December, boosted by the news that President Donald Trump had – despite raising many objections – signed into law a coronavirus relief package worth US$900 billion. His last-minute decision narrowly averted a partial government shutdown.
“The S&P 500 Index registered 33 new closing highs during 2020”
Sentiment was also buoyed by the US government’s approval of the Pfizer/BioNTech vaccine, which was followed by approval for Moderna’s vaccine. Nevertheless, December was blighted by surging infection rates in the US; according to the World Health Organisation (WHO), over 19 million cases had been diagnosed in the US by the end of the year, with more than 335,000 deaths recorded.
During December, the Dow Jones Industrial Average Index rose by 3.3%, climbing by 7.2% over 2020. The Nasdaq Index posted a monthly increase of 5.7% and surged by 43.6% over the year. Meanwhile, the S&P 500 Index rose by 3.7% during December and by 16.3% over 2020.
2020 proved to be an eventful year for American markets: according to S&P Dow Jones Indices, the S&P 500 Index registered 33 new closing highs during 2020, and also experienced a bear market – in which the index fell by 33.93% between 19 February and 23 March – and a bull market, in which it rose by 67.88% from its 23 March low. However, an “uneven” market, exacerbated by shutdowns in various sectors, increased top-heaviness in the S&P 500 Index: 27.4% of its value was in the top ten stocks by the end of 2020, and three stocks – Apple, Amazon, and Microsoft – accounted for more than 53% of its total return over the year.
The Federal Reserve (Fed) upgraded its forecast for US economic growth next year from around 4% to 4.2%. Nevertheless, Fed Chair Jerome Powell warned that the next few months are likely to be especially challenging, although he believes that the economy is set to perform strongly during the second half of 2021 once a significant proportion of the population has been vaccinated. Most members of the Federal Open Market Committee (FOMC) expect US interest rates to remain near zero through to 2023. The Fed also announced that US banks would be allowed to resume share buybacks in addition to dividends, subject to certain restrictions. JPMorgan Chase subsequently revealed a US$30 billion buyback programme, to start in the first quarter of 2021.
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