2020 was a very dramatic year for equity returns, especially in the U.S. After falling more than 31% by March 23, U.S. equities made a dramatic comeback led by technology stocks, finishing the year up almost 18%. The NYSE FANG+ index (which includes Baidu and Alibaba) returned a breathtaking 103% in 2020. U.S. initial public offerings during the year, as measured by the FTSE Renaissance U.S. IPO index, also nearly doubled. The performance difference between growth and value was only exaggerated. Developed European and Asian markets made a comeback, but ended close to where they started.
Tech up, energy down: There were dramatic differences in returns by capitalization, style and sector. Growth trounced value. Small caps lagged. Technology stocks' soaring prices contrasted with energy equities' losses.
Tech bubble 2.0? Dramatically different returns have led to a significant disparity in valuations: The dividend yield of energy companies is almost 6%, while tech companies yield less than 1%. Value and growth stocks' P/E ratios differ by 10 points.
Room to grow? European equities ended 2020 close to where they started. Of the larger markets, the Netherlands and Germany fared best, while the U.K. fared worst. In a yield-starved world, the 2% to 3% yields in many markets seem like an attractive option.
Emerging: The real standouts in Asia were in emerging markets: South Korea, Taiwan and China all returned more than 30%. Relative to the U.S. valuations, as measured by dividend yields, developed market Asian stocks are also relatively inexpensive.
*As of Nov. 30. Sources: Bloomberg LP, S&P Dow Jones Indices LLC/div>