2020: The Year That Wasn'tSubmitted by Triumvirate Financial Services on December 23rd, 2020
2020: The Year that Wasn’t
Jeffrey P. Kendall, CFP®
As we are coming to year-end, I wanted to share a few thoughts on the crazy market events of 2020, and also expectations for 2021. Maybe all this will help us be prepared for the next bubble, pandemic, government shutdown, etc… because you know there is always something. Even though none of us want to relive 2020, I think we can always learn something from 2020.
So what did we learn?
Stay calm and carrying on. I don’t think I have to tell you how crazy 2020 was in the stock markets. We saw a historical drop, followed by an almost immediate historical rebound in global stock markets. As sure as the sun is going to rise tomorrow, there will be another downturn in the future, so lets view the next down turn for exactly what it is…an opportunity!
As I have always said, the stock market is not red or blue, it is green! There are too many people with aligned interests to see stocks stay down forever. It is in everyone’s best interest to see the stock market, and our economy, go up. There are individuals, companies and politicians all with the same desire, to see our economy and markets do well. So although, there will be down times, too many people are pulling on the same rope for it to stay down.
As it relates to markets, remember this great quote from Warren Buffett, “The stock market is a device for transferring wealth from the impatient to the patient.”We must be patient during times of volatility. I know it is counterintuitive, but instead of selling during the down times, we need to be buying…as many of my clients did back in the spring. Of course, the extent of that buying will be determined by your personal situation. And at the very least, keep your dollar cost averaging strategy intact, rely on your allocation and remember your PLAN.
The government has shown that they will be extremely accommodative during a time of crisis. From low interest rates to quantitative easing to PPP loans to direct checks to individuals, it is in the politicians best interests to provide help during these tough times…as we see happening right now with more stimulus coming out.
Looking forward to 2021
Is the new normal here to stay? If so, where are the opportunities, if any? Now, I expect there will be pent-up demand to get out of the house and travel, but once that subsides, we will still have to face the reality that the virus may be with us for a little while. As a result, there could be opportunities that could provide the potential for growth in investments.
Work at home - The software that makes this easier is here to stay. People will continue to look to improve their living situations, whether that means fixing their current homes or buying new ones, large office spaces may be less desired and in-home gym equipment may continue to see an increase in demand.
Online learning – Software for workers, will also be required for students. I do think schools will reopen fully as we head into next year (as many have already opened, at least partially), but the software for possible future use of for use in colleges could make for interesting investments.
Health care – As we have seen from the vaccines from Pfizer, Moderna and a few others, health care companies seem to be more important than ever. Couple that with our ever-aging population, and that could make for some interesting investment opportunities.
Reduced travel both professional and personally - Since people may not be traveling to exotic beaches as much, does this mean our local beach real estate sees a nice jump in value over the coming years? How does that effect travel and leisure stocks?
Low interest rates are making bonds less attractive – In low interest rate environments, good credit companies are paying really low bond interest payments, so as a result, we are going to have to explore more alternative-type investments that can possibly help to guard against risk while giving a decent return.
What can we expect from the stock markets?
No one can predict the future, so I won’t try to, but based on personal opinion, LPL Research and comments from many investment firms, I think we can expect high single digit returns for 2021. I also expect a slight shift back to more value or dividend-paying companies. Now, I don’t think the growth stocks are going away, as we just discussed above, but I don’t expect it to be nearly as huge a difference in returns of those two asset classes next year.
That’s about it. I hope you found this informative and helpful. The goal here is to provide some education, so you don’t get too excited in good years and feel a greater sense of ease in the bad years.
See you in 2021.
Jeff Kendall is a CERTIFIED FINANCIAL PLANNER™ with a focus on growing families and acts as his clients’ personal CFO…so they can take care of the things that matter most to them. Jeff can be reached via email at email@example.com or by calling his office at 704-659-2195. You can also visit www.triumfs.com.