It is finally here. Our opportunity to turn the page on a year which can be described by a plethora of adjectives: challenging, chaotic, depressing, divisive. There are probably a few R-rated ones that come to mind as well... For many, it will be a year to forget.
That said, we warmly contend that 2020 is a year to remember. While we also look forward to the psychological “fresh start” that a new year brings, we think it is important to reflect upon the lessons that life has taught us over the last twelve months. As the late basketball legend Kobe Bryant said, “Everything negative – pressure, challenges – is all an opportunity for me to rise.”
You probably don’t need us to remind you, but this year certainly brought several challenges to the forefront. The world-wide pandemic has had an impact on everyone’s life – whether it be their health, finances, profession, or simply the ability to enjoy a meal with friends at their favorite restaurant. To top that off, our country wrestled with the issue of racial injustice and held an election that drove a wedge between friends and families with differing political views. Oh... and we almost forgot to mention the wildfires!
So what lessons are there to be learned?
First, we are reminded to count our blessings and not take a single day for granted. We are grateful for our health, loved ones, jobs, and freedom. We learned to look at ourselves in the mirror and contemplate how our actions and inaction has an impact on the lives of others. We witnessed another perfect example of why not to panic when the stock market stumbles and tumbles. We found that our overall happiness increased when we took a break from all the different channels on cable news. Overall, we all have our own takeaways from 2020 and hopefully can use this experience to live a fuller life.
Therefore, looking forward to 2021, we envision a year defined by hope. Hope for an economic recovery that gets millions of Americans back to work. Hope for a step towards social and political civility. And hope for a successful vaccine that puts the pandemic behind us. Perhaps it’s no coincidence that the Roaring 20s came immediately following the Spanish Flu.
From an investing standpoint, our stock market outlook is optimistic. Another leg to higher stock prices could be in the cards when you look at the macro-economic backdrop. We anticipate a synchronized global economic recovery aided by the widespread distribution of a Covid vaccine and have already begun to see the positive impacts of excess liquidity, fiscal stimulus, and historically low interest rates. These factors could drive corporate earnings higher, and history shows that strong earnings are a key to long-term growth.
While there are several potential catalysts to higher highs, we still recommend taking a disciplined and long-term approach when determining your asset allocation. The S&P 500 has rallied over 65%1 since its 52-week low on March 23rd and the stock market could already be pricing in next year’s high expectations. Additionally, we shouldn’t ignore short-term risks presented by increased cases of Covid-19 and the upcoming runoff election in the Senate.
All in all, 2020 has been a difficult year for everyone. We had our fair share of challenges yet are making our way through to the other side. Our approach has been to take all the negativity and look for reasons to be thankful. We are especially grateful for our clients and are always here to help. We look forward to life after the pandemic. A life which hopefully represents the modern-day Roaring 20s. Referring back to Kobe’s wise words – now is our opportunity to rise.