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Source: BDO
Wealth Advisors
Market Perspectives
December 16, 2020
- Calendar year 2020 has seen markets fall at an almost unprecedented rate, and then rally at an equally unprecedented rate
- Following the sharp decline, the S&P 500 experienced the fastest (and steepest) recovery in history.
- Throughout the volatility, maintaining a long-term approach kept investors focused, with individual goals and objectives remaining the priority.
“The way to make money in the stock market is to buy a
stock. Then, when it goes up, sell it. If it’s not going to go up, don’t buy
it!” – Will Rogers
As
markets roll into the holiday season, the turmoil of 2020 is beginning to fade
from the investor psyche. While the health care crisis from COVID-19 rages on,
vaccines are on the way, and investors have begun to look towards the return of
normalcy. We have started to hear from market pundits that stability has
arrived. Our year end note (coming in early January) will dive deeper into some
of these behavioral finance concepts. As we prepare additional commentary for
the upcoming year (i.e. tax policy, COVID, economic recovery, stimulus, etc.),
this note looks back and reflects on a year which was anything but stable. As
the quote above humorously implies, investing is never easy, but 2020 was
exceptional in more ways than we can count.
From
the March 23, 2020 lows through December 11, 2020, the S&P 500 experienced
the largest percentage increase for a rolling 263 calendar day period since
1990. The graph below shows that this recovery rivaled the financial crisis,
slightly exceeding that mark.
Clearly
this has been a “Jekyll and Hyde” type of year. The Dr. Jekyll portion of the
year was vicious, beginning at the mid-February highs, and continuing until the
March lows as seen in the graph below. The total decline at that point was just
over 30% year to date before the recovery began. The S&P 500 now stands up
approximately 15% year to date.
As
markets head to the end of 2020, it is important to remind ourselves, and our
clients, that it is nearly impossible to predict the market returns over any
timeframe. This is the time of year in which economists, analysts, and market
experts attempt to “guess” what will happen in the coming year. This is a great
disservice to investors around the world. While we certainly do not ignore this
data, we are firm believers that the primary way for investors to achieve their
goals is to maintain a disciplined process. 2020 highlighted the rationale for
such an approach and reminded us of one of famed investor Warren Buffett’s
popular quotes:
“In
the business world, the rear-view mirror is always clearer than the
windshield.”
As we conclude this remarkable year, we thank you, our clients
and colleagues, for your trust, loyalty, and confidence. We are humbled daily
by the incredible partnerships and friendships we have carved out over the
years with each one of you. We wish you and your families a very happy and
healthy holiday season and we look forward to continuing our dialogue into 2021
and beyond.
For any questions regarding this article etc,
kindly contact Larry Miao (smiao@bdo.com)