2020 Year-End Market Review: A Year That Surprised Everyone

There is a high probability that you feel a sense of relief with the conclusion of 2020 after the hardships and pain some have endured due to Covid-19. To say 2020 was an eventful year is an understatement. Between the once in a hundred-year Coronavirus pandemic, the presidential impeachment, and the presidential election, 2020 kept us on our toes! There was much uncertainty in 2020 with quarantines, a surge in unemployment rates, Covid cases spiking then lowering then spiking again, and the fiercely contested election lawsuits. With this in mind, our number one priority in 2020 was not to lose you big chunks of money as we began to expect the unexpected in 2020. Since we don’t have a crystal ball, we limited losses and missed gains. In 2020, the S&P 500 stock market index had drops of -34% (February-March), -8.2% (June), -9.3% (August), and -8.9% (October). It was one of the most volatile years ever for random, violent drawdowns.  Remarkably, the S&P 500 finished positive for the year because of a rally after the election, which surprised many market participants because of Biden’s plan for higher corporate taxes by repealing that portion of the Trump tax cuts (Source:  https://finance.yahoo.com/quote/%5EGSPC/history?p=%5EGSPC).

What to Expect in 2021?

As we look forward to 2021, historical financial data provides a sense of optimism. These are some of the powerful positive forces that support the markets in 2021:

1. When the market looks at corporate earnings, they consider year over year statistics. For most companies in the S&P 500 and DOW, it should be easy to beat the Covid impacted year over year performance of 2020.
2. Tremendous progress has been made with respect to medical solutions to combat COVID-19, and this has given hope for a more “normal” 2021. The economy can expect a boost from the shift to a post-vaccine phase.
3. Historical data tells us that people spend the most money between the ages of 35 and 54. That is when many people rise on the corporate ladder, get married, buy houses, and have kids. In the 1980s and 1990s, the baby boomers were the most considerable portion of the population. They were in their peak spending years, and as a result, the market and economy shot up. For the past 20 years, the baby boomers have been decreasing their spending as they got closer to and entered retirement, and that has pulled the average annual return of the stock market down significantly. The good news is that there are more Millennials than baby boomers, and starting in 2021, Millennials and Generation X’ers have more spending power than the Baby Boomers for the first time in history. That should be a HUGE tailwind for the economy for the next 15-20 years like it was in the 1980s and 1990’s when the Baby Boomers were in their peak spending years.

We will continue to provide daily portfolio monitoring to optimize investments in 2021. Our strategy moving forward is to buy the dips to try to take advantage of market drops. We also plan to shift our most aggressive Sector Rotation portfolio into more individual stocks in 2021 to increase risk and potentially increase the return potential.

Any Questions?

If you have any questions about taxes, your individual investment portfolio, our 401(k) recommendation service, or anything else in general, please give our office a call at (586) 226-2100. Please feel free to forward this commentary to a friend, family member, or co-worker. If they would like to receive this commentary in the future, please send us an e-mail at at your earliest convenience. If you have had any changes to your income, job, family, health insurance, risk tolerance, or overall financial situation, please contact us to discuss it.   Thank you for your confidence and referrals!   Bob Wink, Ken Wink, Jim Wink, and Zach Bachner

Notes & Disclaimer: Stock market indices, like the S&P 500 Index, are unmanaged groups of securities considered to be representative of the stock market in general or subsets of the market, and their performance is not reflective of the performance of any specific investment. Investments cannot be made directly into an index. Historical returns data are calculated using data provided by sources deemed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, or correctness. This information is provided “AS IS” without any warranty of any kind. All historical returns data should be considered hypothetical. Past performance is no guarantee of future results.

This communication is only intended for recipients who reside in states where our agents are licensed to sell these products. Investment advisory services are offered through Summit Financial Consulting, LLC, an SEC registered investment advisor. Registration does not imply a certain level of skill or training. Summit Financial Consulting Investment Advisor Representatives do not render tax, legal, or accounting advice. Insurance products and services are offered through Summit Financial Consulting, LLC. Note: Please update Summit Financial Consulting, LLC, if your investment objectives have changed or if the personal or financial information previously provided has changed. The investment advisory disclosure document that describes Summit Financial Consulting investment advisory services account is provided to you annually. Please consult Summit Financial Consulting for a copy of this document should you need an additional copy. All guarantees are subject to the claims paying ability of the issuing insurance company. Past performance cannot predict future performance. It is not possible to invest directly in an index. The Sherman Group, LLC is not associated with Summit Financial Consulting, LLC in any way, other than a research sharing partnership. Back testing is more heavily scrutinized than any other type of investment analysis because it can be updated to take advantage of past data. The algorithms and trading signals that we receive from the Sherman Group, LLC were created using back testing with the goal of creating a sustainable research process. We have reviewed data from the entire 20 year period which was mostly back tested, and have also personally reviewed the live data for the past 5 years and feel comfortable with it, but we encourage you to meet with us and ask questions so you are fully informed on what we plan to do with your investment assets at TD Ameritrade. It is important to look at fees, taxable repercussions, and trading frequency when looking at a rate of return number. There is no perfect system or research feed, and Sherman Group, LLC has had both longer term and short-term periods where they lost money. Investing involves risk, and these portfolios are no exception.