I would guess the word “crazy” is the most used word of 2020, and I can’t think of one that sums it up better. Nobody could have guessed what was in store for the year, we have all experienced challenges, and yet we’ve persevered. I thought I would share a few industry related thoughts and takeaways from this crazy year!
- The Market – It was a reminder of what can move markets. When the pandemic started to spread rapidly in New York, kids were sent home from school, church was closed and life changed in many ways overnight, and the market fell over 30% in record time. As more information was discovered and the Federal Reserve and Congress made it clear they were willing to step-in in a large way, markets started to foresee an eventual economic recovery and rebounded sharply, ending the year (to this point at least) well in positive territory. The market moves were way ahead of changes in actual economic data and it was a reminder that markets are both forward looking and influenced by emotion. The most consistent and reliable investment strategy is to make sure your investments are properly allocated and to stay invested, strategically rebalancing when the opportunity arises.
- Businesses – This is a tale of two sides. There are many businesses, both public and private, that are doing very well and have even benefited from the pandemic (think Amazon, Zoom and the local Postal Annex I recently visited). In fact, many more companies are prospering than hurting. Of course, for those on the opposite side, it has been very painful. Any business related to hospitality and entertainment such as restaurants, hotels and airlines are having a tough time to say the least, and many have gone under. I truly feel for those who work in these industries. I encourage individuals who know people suffering due to circumstances out of their control other than the fact that they happen to work in a hard-hit industry, to be sympathetic and supportive where you see the opportunity to be.
- Interest Rates – At the end of last year Barron’s published the forecasts of 10 Wall Street strategists on where the 10-year treasury yield would be at the end of 2020. The range was 1.5% to 2.2%. Currently, the 10-treasury yield is under 1%. This low interest rate environment makes it difficult to earn meaningful interest on conservative investments, but the flipside is money has become even cheaper for borrowers. If you have a mortgage and haven’t looked into refinancing it, I suggest you consider it, but be sure to do something constructive with the savings, don’t just reset your loan! These low rates have also helped fuel a strong real estate market.
The topics above don’t even scratch the surface of how life has changed in this unprecedented (maybe this is the most used word of the year?) year. Obviously there has been pain from loss of life, challenges of distance learning, a polarizing political environment and many other difficulties. There have also been positives such as more time together with family, less time commuting, and a chance to evaluate priorities and get some home projects completed. In this holiday season, I encourage you to take stock of the blessings of 2020, and learn from the challenges, as I am sure we’ve all experienced both.
I am so grateful for my family, friends, clients and my faith, as much in this year as any. Merry Christmas and may you experience God’s blessings in 2021.
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