How Did We Do? Grading the MarketGrader Indexes in 2020

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While the rollout of our new website last month kept us too busy to report on our 2020 performance, we wanted to make sure we didn’t let too much time pass before we tallied our Indexes’ results in what was a momentous year, to say the least.

As of the end of December 2020, MarketGrader was publishing 33 live indexes (several of which are calculated by third parties including ICE Indices, China Securities Index Company, Solactive and Refinitiv). As has been the case in most years, we discontinued a few indexes that we felt were offering little value to our readers and our research subscribers while adding a few new ones. Five of our indexes are currently tracked by exchange traded funds (two in Australia, three in the United States), which we highlight throughout this post and link back to their fund pages for those interested in learning more about them.

The Highlights

There were four standouts among our U.S. Indexes in 2020: the Barron’s 400 Index, the MarketGrader Health Care Index, the MarketGrader Technology Index, and the MarketGrader US Income Index. By the way, we started calculating and publishing last year a market capitalization weighted version of the Barron’s 400 Index given the many questions we get repeatedly about it from clients. We now report on the performance, on a daily basis, of both version of the Index in B400’s performance page. The equally weighted version of B400 (tracked by the Barron’s 400 ETF), with which most of our readers and subscribers are familiar, ended 2020 with a total return of 18.3%, well above the equally weighted version of the S&P 500, which returned 12.8%. The market cap weighted version did even better, closing the year up 23.4% also on a total return basis compared to 18.4% for the comparable version of the S&P 500 Index. Historical yearly returns as well as annualized figures for B400 and all other MarketGrader Indexes are available in our 2020 report card, which can be downloaded at the bottom of this post.

Among our US Sector Indexes, Technology, Consumer Discretionary, and Health Care were our top three performers, up 43%, 22.7% and 16.5% respectively (price-only returns), although Consumer Discretionary failed to beat its benchmark, the S&P Composite 1500 Consumer Discretionary Index. Although, to be fair, all MarketGrader US Sector Indexes are equally weighted, whereas the S&P Composite 1500 Sector Indexes we use as bogeys are market cap weighted.

Lastly, our US Income Index had another solid year thanks to the portion of its total return derived from dividends, despite a negative price return of 3.5%. Thanks to a dividend return of 7% the index, designed to earn income reliably from 100 common equities, closed the year up 3.5% on a total return basis. This far outpaced the Dow Jones Select Dividend Index, which ended 2020 with a total return of -4.6%. Perhaps most impressively, MarketGrader’s US Income Index has earned an annualized total return of 9.5% between 2007 and 2020, with almost 5% of that return per year coming purely from dividends. In the last three years, in fact, the annualized dividend return has been 5.6%.

Growth Leaders

Three of our Growth Leaders had stellar years both in terms of absolute returns as well as in relation to their benchmarks. The MarketGrader China All-Cap Growth Leaders Index (tracked by VanEck’s China Growth Leaders ETF) closed the year up 44.4%, as Chinese markets soared following the country’s economic lead out of the pandemic-induced recession earlier in the year. The MarketGrader India All-Cap Growth Leaders Index (tracked by VanEck’s India Growth Leaders ETF) ended 2020 up 20.7% on a total return basis, its best year since 2017. The MarketGrader Emerging Markets All-Cap Growth Leaders Index, introduced last year, gained 37.4% in 2020, well ahead of the 18.7% in total return posted by the ubiquitous MSCI Emerging Markets Index. Our MarketGrader Brazil All-Cap Growth Leaders Index, on the other hand, had a dismal return, falling 28.7% in 2020. It nevertheless still leads the MSCI Brazil Index by almost 4% per year since 2007.

China

The three indexes in which MarketGrader collaborates with CSI (China Securities Index Company) beat their benchmarks in 2020. The CSI MarketGrader China New Economy Index (tracked in Australia by VanEck’s China New Economy ETF) gained 32.1% on a total return, local currency basis. Notably among MarketGrader’s other China Indexes, our ‘New Elite 30 Index,’ made up of the 30 companies in China most regularly selected to the CSI MarketGrader China A-Share 200 Index, had a 47.7% return in 2020, and has now gained 18.1% per year (in local currency) since 2007.

Europe, Israel and Global Health Care Stand Out Among Strong Global Returns

In addition to our US and China Indexes referenced above, MarketGrader publishes 11 global indexes (three of which are referenced in our Growth Leaders section above). Our overall returns across all of these indexes were very strong in 2020, perhaps with the exception of our MarketGrader Pacific Alliance 40 Index, which is made up of the best 40 companies in Mexico, Colombia, Peru and Chile. While that index lost 3.5% for the year on a total return basis, its benchmark, the FTSE All Cap Latin America Index lost 14.3%. MarketGrader’s Pacific Alliance 40 leads the FTSE benchmark by 7.8% per year dating back to 2007.

The best performer among our ‘other’ global indexes in 2020 was the MarketGrader Europe 100 Index, with a total return of 40.8% for the year, well above the 4.6% gained by the STOXX Europe 600 Index. The MarketGrader Europe 100 has now gained 9.5% annually since 2007, compared to -0.7% for the STOXX benchmark. Likewise, the MarketGrader UK 100 Index, following a 14.6% total return in 2020, leads its benchmark, the FTSE 100 Index by 931 basis points per year, also dating back to 2007. Our MarketGrader Israel 40 Index once again had a stellar year, posting a total return of 27.3% compared to MSCI Israel’s 15.2%, the fifth year in a row in which the MarketGrader Index beat its benchmark. MarketGrader Israel 40 Index has now returned 10.1% annually (in USD) since its base date in 2007. Lastly, the MarketGrader Developed Markets (ex-Australia) Health Care Index (which since September has been tracked in Australia by the VanEck Global Healthcare Leaders ETF) closed its maiden year with a strong 18.8% total return, well ahead of its benchmark, the S&P Global 1200 Health Care Index, which gained 3%.

Investors interested in our global indexes may visit the Global Indexes section of our website or take a trial to view all of our index constituents or to view MarketGrader’s ratings on all constituents in over 1,400 equity ETFs under coverage in our ETFGrader.

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