As always, I want to thank you all for being such great clients and friends. Let me also thank you all for trusting me with your hard-earned money and pursuing your financial security, particularly in this trying time. Many of you have trusted me with new investments this year and to those that have helped me by providing referrals, a special thank you. That vote of confidence means so much to me.
What a crazy year 2020 was. I hope that everyone is healthy and ready for a better 2021. With vaccines rolling out I know that I am more hopeful than I have been in some time. Many of you have heard of vaccines from companies such as Pfizer/BioNTech, Moderna and AstraZeneca but there are more that are not far behind from Johnson and Johnson, Novavax, and a few others so there is a reason to see to the other side now.
First let us review 2020. The market as measured by the S&P 500 on March 23, 2020 was down almost 35%. At the end of the year the Dow Industrials ended up 7.3%, the S&P 500 up 16.3% and the Nasdaq up 43.6%. Many clients in March and April panicked about their investments and rightfully so as the world seemed so uncertain. With all the uncertainty that we faced in March and April; the market returns showed that staying invested and having a trusted advisor is important. Individual investors are prone to investing from emotion which could hurt investment returns. I maintained the “Stay Invested” as well as “Buy when others sell and sell when others buy” investing philosophies. Even with the positive index returns there has been large destruction in the economy in several sectors such as restaurants, real estate and other due to COVID-19. I have and will continue to focus on growth investing since interest rates have been exceptionally low and growth stocks tend to outperform due to lower borrowing costs. I also believe growth stocks offer much larger opportunities for revenue and earnings growth. The difference between growth stocks as exhibited by the Nasdaq and value stocks as exhibited by the Dow probably is not repeatable too.
Now for what to look forward to in 2021. There is no definite timeline to when the country will be free of COVID19, but the market has been investing for when the vaccine is here in full force and the virus is over. This has been the investment theme for some time now and that reality seems closer. There is an estimated $4.5 trillion in cash on the sidelines in money market accounts and savings accounts that may limit selling pressure and provide more buying opportunities to drive prices higher. The FED and government continue to provide stimulus which provides even more capital to get companies past the virus as well as more dollars for investors to invest. While people stay at home and save money due to lower spending and are provided more stimulus money, that money may also be invested in the market. Finally, as the FED has promised to keep interest rates low, there are few options to invest in that seem as likely to return profits as stocks. The market returns as exhibited by the S&P 500 and Nasdaq, may not be realistic to repeat this year since there were several amazing buying opportunities 2020.
When an investor buys stocks, they are in fact investing in the future profitability of those companies. There could be tremendous pent-up demand after the virus is defeated that may provide more growth for companies and the economy. Companies as well as people have saved large amounts during the virus and likely have become more efficient which should last after the virus is over, meaning more savings, better earnings, and increased wealth. I believe that the market is set up to move higher in 2021 although the end of 2020 may have robbed froward some of those expected returns. I do not plan to get too conservative in 2021 but that could change, and the FED may start to make moves to curb inflation and force interest rates higher which is not good for stocks.
Please call me to review your account returns for the year and please let your friends and family know about me. Thank you very much.
The S&P 500 Index, Dow Industrials and NASDAQ are unmanaged and cannot be directly invested into. Past performance is no guarantee of future results. Investing involves risk and the potential to lose principal.
The information provided, including references to individual companies are for general informational and educational purposes only. No comments referenced herein should be construed as a recommendation of any kind or investment advice.
Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time and cannot be guaranteed. Actual results could differ materially from those anticipated. Please consult your financial advisor before making financial decisions.
(01/21)