Good riddance to 2020. A year we won’t soon forget, but one we are glad to put in the rear view mirror.
The first and last posts of each year are always my favorite. It’s fun to look back on what we thought was going to happen and be astonished at how different reality looks versus our predictions (which are destined to be wrong). So let’s jump into it. A few points from our post at the end of 2019 are in italics below.
- Over the past 70 years (since 1950), the S&P 500’s yearly performance has been above 20% 18 times. In the year following those 20%+ gains, the market has been higher 15 times (83.3%) with an average return the following year of 11.2%.
- As of the last week of the year, the SPY (the ETF proxy for the S&P 500) is up about 15%, without including dividends. Looks like history will look back and see we’re now up 16 out of the last 19 years following a 20% year. The takeaways for us continue to be that strength begets strength, and history as a guide for the future remains a solid tool for planning.
- We love not getting too smart about this market. This market has been more resilient than anyone expected, and until that changes, the trend remains our friend. “It’s expensive.” “It can’t keep going up forever.” “Eventually we WILL have a recession.” All these things and many more are true. But the economy and the year-to-year stock market changes have very little to do with each other.
- Boy, does this one sound familiar? This one could have been written last week, but after a year in which we saw the Dow Jones dip below 19k, and is likely finish to the year over 30K, it appears we are right back where we started. The same tailwinds we had at the end of 2019 remain, and with the Federal Reserve and US government working in tandem (better late than never) to stimulate the economy and hopefully get the vast majority of the 10 million unemployed Americans back to work, there is reason for optimism. This belief has been the fuel pushing equity prices to all-time highs, and possibly much higher for 2021 (but we will discuss our view for 2021 in the next post).
- Themes to watch in 2020 – eSignatures, Biotechnology, 5G Technology, Digital Payments, Cannabis, Master Limited Partnerships
- Second Level Capital went 5 for 6 this year with theme selections, with 4 of the individual stocks rising over 100% this year. The energy sector remains the rented mule of the equity markets, although oil prices appear to have stabilized for the time being. And what was the downside of watching a few individual names skyrocket 100%+ this year? You had to watch 5 out of the 6 decline by over 50% during the March low (ouch).
This year was a huge test, which you passed with flying colors. We’d rather not do that again, but we know better. History tells us that during the next 10-20 years, our guess is something similar will happen another 2-3 times. No matter which box you check on a client account form telling us your “risk tolerance”, no one really knows how they will react until they find themselves in a 2020 situation.
While we’ve learned a lot about ourselves this year, my own personal resolution for 2021 will be to help more people. The middle class in this country is being pulled into oblivion, and it’s going to be the job of every American to lend a hand to his or her neighbor, whether they are in immediate trouble or not. Next time, it might be you. The old saying goes that a recession is when your neighbor loses his job, a depression is when you lose yours. For 10 million Americans, they are living in depression right now.
Lastly, we’d like to say thank you. The overwhelming majority of our clients trusted in us enough to stick with the program through the worst monthly decline of our lifetime. I’d like to believe your resolve was due, in part, to the trust we strive everyday to build and keep. Investing is simple, but never easy.
From the bottom of our hearts, thank you for reading, listening, and putting your faith in us. Our promise remains to keep your investing advice individual and tailored to your specific needs. We are amazed and grateful that our business continues to grow and if there is any way we can help others (whether it be financial advice or otherwise), we would love the opportunity.
Here’s to hoping 2021 is at least a little calmer than 2020.
– Adam