Stock Index Funds Outpaced Alternative Investments in 2020



Fiscal and Monetary Stimulus Efforts Energize Stock Index Funds

In 2020, alternative investments like fine wine, classic cars, art, diamonds, and other luxury goods did not perform as well as stock index funds. During typical years investors put money into alternative investments to potentially increase their overall returns.

In 2020, however, alternative investments struggled while the S&P 500 index climbed over 15% and the Nasdaq index rose almost 43%. The Bloomberg Barclays Global Aggregate Bond Index surged 9.2%. Stock index funds and bonds were boosted by monetary stimulus and interest rate cuts as governments worked to prop up their countries’ economies during the pandemic.

Luxury Goods Hit by “COVID Prices”

Meanwhile, the COVID-19 pandemic negatively impacted alternative investments in a number of ways. The pandemic closed auction houses, which slowed the sale of paintings, antiques, and sculptures. On average in 2020, fine art sold for about 10% less than it did in 2019.

Sebastian Duthy, Chief Executive at Art Market Research, said, “Collectors increasingly expected to pay ‘Covid-prices’ and average values were down by the end of the year. There were half the number of individual artist records at auction when compared with 2019.” Transaction volumes also fell for luxury goods like jewelry and cars, which hampered these investments’ performances.

Tech Stocks Surged

While a lack of in-person events during 2020 hurt alternative investments, the shift to remote work last year caused many technology stocks to surge. For example, Zoom Video Communications (ZM), the video conferencing company whose software has become central to many business’ pandemic operations, saw its shares rise 395% in 2020. Shares began the year at $68 and eventually rose to $335.

2020 was a unique year for all types of investments. The pandemic is far from over, but vaccine rollout operations are providing glimmers of hope for a return to normalcy. Investors in the stock market and luxury goods will be eager to see how the coming months unfold.

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