S&P Finishes the Year Up

Equity markets, as measured by the S&P 500® Index, closed the final week of 2020 up 1.4% with the Utilities and Consumer Discretionary sectors leading the way. All told, 2020 was a remarkably resilient year for stocks, as the S&P 500 finished the year up 18.4%. In February and March, stocks tumbled as the COVID-19 pandemic caused the quickest peak to trough recession in market history, taking a mere 33 days. The quickest retracement in market history followed that drop, taking only 148 days. For 2020, the S&P 500 Information Technology sector was up 42.9%, the Consumer Discretionary sector was up 33.3% and the Communication Services sector was up 23.6% to lead the market. All was not rosy, however, as the S&P 500 Energy sector fell 33.7%, while the Real Estate and Financials sectors declined 2.2% and 1.8% respectively. While the total return for the market was heartening, the narrowness of the market was noteworthy. The Big Five stocks–Apple, Inc., Microsoft Corporation, Amazon.com, Inc., Alphabet, Inc. (Google) and Facebook, Inc. were up an average of 53.0% and ended the year at a remarkable collective weight of 21.7% in the S&P 500 Index.

Looking ahead, investors will focus on the Georgia Senate run-off elections on Tuesday to determine control of the U.S. Government. If the Democrats win both seats that would bring the Senate to a 50-50 tie which would then have a tie broken by Vice President-Elect Kamala Harris after her January 20th inauguration. If the Republicans win one of the two Georgia races, they will retain control of the Senate for the next two years, dealing a blow to Democrats hoping to pass more progressive legislation.

The S&P 500 Index was up 1.4% for the week. Its top-performing sectors were Utilities (2.5%) and Consumer Discretionary (2.0%), while the bottom-performing sectors were Industrials (0.7%) and Energy (-0.4%). In the fixed-income market, the 10-year Treasury yield was even, ending at 0.9%.

We continue to seek companies that reflect our Change-Based^SM investment approach.

Change Based Investment

Zimmer Biomet Holdings is a U.S. based medical device company founded in 1927. Zimmer designs, develops, manufactures and markets orthopedic products including knee, hip, shoulder, elbow, foot and ankle artificial joints and dental prostheses. The company has operations in more than 40 countries.

The coronavirus has caused elective procedures across the globe to be put on hold, significantly pressuring Zimmer’s fundamentals. While the near-term fundamentals are expected to remain weak, this environment offers an opportunity to invest in a high quality, leading orthopedic company at an attractive discount to its long-term value. The company is also entering a new product cycle with the rollout of its Rosa robotic surgery platform. We expect this platform to drive significant growth acceleration for years to come. While we cannot predict the timing of when elective procedures will normalize, Zimmer’s new product cycle, history of successful execution and market-leading position make Zimmer a good fit for Argent’s Large Cap strategy.

Top 5 Equity Holdings

Large Cap Growth