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2020 In Review

My Sunday School teacher often said, “If you stay ready, you don’t have to get ready!”  As much as we try to prepare, I’m not sure that any of us were truly “ready” for all that 2020 brought.  I know that many of you have suffered great personal loss as a result of Covid-19 and we join you in looking forward to a better 2021.


Once in a blue moon, we have a year that may serve as a master class in the principles of successful long-term, goal-focused investing.  Two thousand twenty was just that year.  On December 31, 2019, the S&P 500 stock index closed at 3,230.  This past New Year’s Eve, it closed at 3,756.  You can infer from these numbers alone that the equity market had, in 2020, quite a good year. 


From a new all-time high on February 19, the market reacted to the onset of the greatest public health crisis in a century by going down roughly a third in five weeks.  The Federal Reserve and Congress responded with massive intervention and the economy learned to work around the lockdowns.  As a result, the S&P 500 regained its February high by mid-August.


The first lifetime lesson here: At their most dramatic turning points, the economy can’t be forecast, and the market cannot be timed.  Instead, having a long-term plan and sticking to it (acting as opposed to reacting, which is your and my investment policy in a nutshell) once again demonstrated its enduring value.  Two additional lessons worth noting. (1) The velocity and trajectory of the equity market recovery essentially mirrored the violence of the February/March decline. (2) The market went into new high ground in midsummer, even as the pandemic and its economic devastations were still raging.  Both outcomes were consistent with historic norms.  “Waiting for the pullback” once a market recovery gets underway, and/or waiting for the economic picture to clear before investing, turned out to be formulas for significant underperformance. 


The second great lifetime lesson of 2020 had to do with the presidential election cycle.  To say that it was the most hyper-partisan in our lifetime wouldn’t adequately express it.  Supporters to both candidates were genuinely convinced that the other would, if elected/reelected, bring on the end of American democracy.  The big takeaway from this: never get your politics mixed up with your investment policy.


“Beware the investment activity that produces applause;

the great moves are usually greeted by yawns.”


-Warren Buffett


The “great move” of 2020 was simply staying put and not reacting to the chaos.  As we look ahead to 2021, there remains far more than enough uncertainty to go around.  You and I as long term, goal focused investors cannot make investment policy out of uncertainties or possibilities.  Our strategy for 2021 is entirely driven by the same steadfast principles as it was a year ago and will be a year from now.  We are certain that volatility will remain.  Unexpected things will occur in 2021 and beyond.  Be ready for them to come.  We must continue to “tune out” volatility.  We act; we do not react.  This was the most effective approach to the success in 2020.  I believe it always will be.  And remember, “If you stay ready, you don’t have to get ready.”


Let me thank you again for being our clients.  The trust you place in me and our team is not taken for granted.  It is truly a privilege to serve you.


All the best for 2021,


Bain Nickels, CKA®

President | Wealth Manager