As we look at the index returns for December 2020, we now have 20 year returns for the MSCI ACWI, MSCI EAFE Small Cap, MSCI Emerging Markets and the blended benchmark which includes the MSCI ACWI.
Equities
The R2000G led all equity benchmarks in December with a 9.3% return, the R2000V had the highest return in Q4 (33.4%), while the R1000G posted the best return for 2020 (38.5%). This is just one quick example of how various benchmarks will lead at different points of time.
If you think back to where we were at the end of March 2020, would you be surprised to see that all equity returns (except for REITs) would experience a positive return for year-end 2020? For those clients that went to cash in March/April, they likely missed out on the extraordinary returns since. This is another example of how hard it is to time the markets.
The MSCI ACWI gained 16.3% during 2020. While some clients may question what the "best" US to non-US equity allocation is, it's important to remember a 16.3% return is quite strong.
For all the talk this year about the FAANG stocks (and Microsoft), it is interesting that the R2000 (20.0%) beat the S&P (18.4%) for the year.
Fixed Income
Fixed income returns were positive for December and Q4 with the exception of intermediate and LT Treasuries, with yields increasing across those portions of the yield curve over the quarter.
For Q4, high yield (6.5%) and 10+ Yr Corporates (5.1%) led the way.
On a YTD basis, LT Treasury (17.4%) and LT Corporates (13.8%) had the highest returns while Intermediate Treasury (9.1%) and Intermediate Corporates (9.9%) did quite well too.
Many clients are asking about where to place cash as it has a 0% return for December and the last 3 months. In fact, the return on the ICE BoA US 3 month Tbill has been 0.0% each month since April 2020.
As an additional note, please keep in mind that these reflect historical performance of the current models, not necessarily how accounts were invested in the past.