Source: BDO Wealth Advisors
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:
the business world, the rear-view mirror is always clearer than the
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.
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