PLAN WELL, INVEST WELL, LIVE WELL.
HELPING CLIENTS GROW AND PRESERVE THEIR WEALTH.
Goldilocks
Q4 2020
As 2020 winds to a close, everyone I know is looking optimistically towards 2021 hoping that next year will return some normalcy to society. From the enormous personal and economic toll of the pandemic, to civil strife and an excessively contested election, 2020 has been unlike any year in generations. For investors, 2020 was a rollercoaster filled with historic selloffs and unprecedented volatility. To put it mildly, the year was one that challenged all of us. Just look at this chart showing the S&P 500 from February through June – It’s like looking at seismograph during a big earthquake!
I expect the global economy to begin to recover in 2021 and beyond, the near-term risks notwithstanding. Betting against improvement is like betting against medicine, science, and human creativity. Stocks are trading cheap to bonds. There is a substantial amount of cash sitting on the sidelines earning nothing. The Fed has signaled its intention to keep rates low for the foreseeable future, thereby incentivizing that money to move into riskier assets. Market cycles typically end with excessive optimism and a Fed monetary tightening cycle. Seen from that viewpoint, you may conclude that we are in the early stages of the next market cycle upwards.
Trends ranging from work automation to remote employees to digital technologies have only been accelerated by the shock of COVID-19. The recovery’s path is likely to prove uneven and varied across industries and regions, even with an effective vaccine slowly rolling out. These conditions are typically favorable to stocks, which tend to outperform bonds when the economy is improving, and policy is supportive. We also favor small caps over large caps, and emerging markets over developed markets.
As 2020 winds down, I want to challenge everyone reading this (including myself) to work on a few things.
Appreciate what you have. If 2020 has taught us anything, it’s that every day is sacred, and tomorrow is guaranteed for nobody. Work on focusing on what you can control. We’re going through quite a bit that is out of our control: Elections, a pandemic, or job loss – remember what you can and can’t control. When it comes to your finances, you can control how much money you save and spend each month. You can control how much debt you take on, and how you pay it off. Fundamentally, your personal decisions are going to move the financial needle much more than the stock market will. One way, at least financially, to be in control is to make a plan. Having a financial plan by your side can be a point of reference whenever doubts creep up.
The days ahead will be challenging. The words above are not intended to sugarcoat what the country (and world) is facing. Nonetheless, I look ahead with optimism knowing that every generation has faced significant challenges and has come back stronger.
As I’ve been apt to do the past few years, in lieu of holiday gifts and cards, I’ve made a donation to the American Cancer Society, which provides support for eradicating a disease that’s near and dear to me and we’ve been suffering from for far too long.
I will leave you with some links to enjoy over the holidays and look forward to speaking with everyone in 2021! First, gaming and it’s place in the world economy continues to grow exponentially – this is a look at the past 50 years of gaming revenue – simply amazing! Solar is all the rage – especially with all of the power outages and fires in the west. Here’s a story about someone going through the process of installing a system. Are electric cars really that clean? Finally, what happens to cities when the ultra-rich depart?
Happy Holidays and Happy New Year!