2020 In Review

February 9, 2021

2020 In Review

Now that 2020 is in the books, we would like to take a moment to give thanks for your business and for your trust in managing your wealth. The pandemic has caused all of us a challenging year in many regards and also for us overseeing investments, as we’ve seen the investment markets gyrate up and down during 2020. Schmolke Investment Team is highly skilled at dealing with all the market turmoil, market rotation, politics, corporate earnings, pandemics, indicators and all the things that move the markets to preserve our client’s wealth. Experience Matters in managing investments, but we also converse with many other colleagues in our industry to get opinions from multiple sources. This, in addition to our experience, allows us to better manage each of our client’s investment strategies. Here is our overview:

The Pandemic:

The COVID-19 pandemic has had an accelerating effect on cultural trends, political trends, market trends, real estate trends and healthcare to name a few. The daily commute is transforming and working remotely is no longer an anomaly, it has become the new standard and we don’t believe it is going back to the old normal anytime soon. The way we receive our medical services has changed and hospital emergency rooms and intensive care units have been overrun.

The international lockdown subsequently suspended personal and commercial activity and virtually froze the world economy. This cast a shadow over the world and created a microscope looking at global supply chains, manufacturing infrastructure, world trade, travel, and contrasts between nationalized healthcare to private healthcare systems. Many small companies permanently closed and numerous large companies had to lay off or furlough a percentage of their workforce.

Social distancing has had its affect as well. Travel has more restrictions, gatherings at concerts, football games, or a local social event in our communities are nonexistent. Eating in a local restaurant is not the same and not available in some cities. Temperature checks are common in most doctor, professional offices, gyms and other facilities. The virtual curriculum options in our schools have become more accepted, but some wonder if it is for the best?

Online shopping has accelerated, virtual online visits have become popular, wearing face masks has become a part of our daily lives and streaming movies has replaced going to the movie theaters. This list goes on but it’s obvious that many changes occurred all in a blink of an eye.

The Investment Markets:

The stock markets were extreme during 2020, seeing a sharp decline in March and a slow bounce back during the rest of the year hitting new all-time highs. Unemployment hit record numbers in a matter of a month due to the lockdown of our economy. The central bank dropped interest rates to all-time lows. Congress infused capital into the markets through the CARES Act, a $2.2 Trillion stimulus bill (1), individuals received one-time payments, as well as increased unemployment benefits and subsidized both individuals and businesses to keep our economy from going into a spiral death roll. Politics was also center stage and we saw polarized bases with a very competitive election and a disturbing assault on our capitol. We also saw another COVID relief bill for $900 Million passed in the final days of December 2020 (2). Subsequently, we saw the markets rebound and now you may better understand the forward-looking nature of the stock markets.

We continue to watch inflationary trends even though there has been little effect on the markets to date. The huge rise in debt triggers us to closely monitor inflation that will at some point start increasing as our country is burdened with an ever-increasing debt load. Precious metals are an area we will also be closely monitoring when we see inflation start to increase, as this sector we believe will counterbalance this potential effect on the markets.

During 2020 we found the S&P 500 ended up more than 16%, the Dow Jones Industrial average gained 7.25% and the tech heavy NASDAQ was up 43.6% (3). As we look back on 2020, most of us will remember it as the worst year of our lives but looking at it from the lens of our financial markets, it was actually quite good.

What Lies Ahead in 2021:

The good news is that Pfizer (4) and Moderna (5) both have received emergency use authorization from the U.S. Food and Drug Administration (FDA) for COVID-19 vaccines. Hopefully, this paves the way to some type of normalization by the end of 2021. The challenge is that the rollout of vaccines is a monumental process to vaccinate the entire world population.

We are now seeing lockdowns in California, New York and many other states. This could turn into another full lockdown and trigger a pullback in the markets at any time. Pullbacks are normal occurrences in the markets and actually are quite healthy. When overexuberant buying happens, markets correct themselves eventually.

This is not the time to panic or get out of the market in our opinion. The average annual return of the S&P 500 over the past 90-years is 9.8% (6) through 2018.

The things that create good investment markets are still in place, which are low interest rates, low inflation, low unemployment (unemployment is higher but appears to be reducing), good corporate earnings and rising GDP. We see the world economy evolving and foresee that there will be more volatility in 2021 but predict a positive year by the end of December. We could see market gains as much as 8% to 12%.

Conclusion:

As always, we watch, analyze and discuss all the indicators and factors. Vaccines should impede the spread of the COVID-19 virus and corporate earnings will rebound in our opinion. It will be challenging for passive investment platforms like index ETFs, where actively managed money in our opinion will probably outperform the averages.

As we meet with our clients this year, it could be a bumpy ride but please feel good that we are overseeing your wealth and will work to preserve your wealth for you and your family to the best of our ability. Thank you once again for your trust and we look forward to another good year in 2021.

If you know someone who needs a trusted and experienced financial advisor group, please pass along their name(s) to us. We want to help as many families as possible in these challenging times.

HAPPY NEW YEAR!

The Schmolke Investment Team

Brian Schmolke, CFP

Bart Schmolke

Experience Matters

Content and opinions in this article are for general information only and not intended to provide specific advice or recommendations for any individiual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All investing includes risk including loss of princiapl.

Any economic forecasts set forth in this article may not develop as predicted and there can be no guarantee that any strategies mentioned will be successful.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

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2020 In Review