2020 is over. What now?

To say that 2020 was an eventful year is an understatement, but 2021 has been interesting as well!  Between the new Covid variants now spreading, the 2nd Trump impeachment, the riots at the capital, and the end-of-month drop in the market involving GameStop and AMC, 2021 is already off to a volatile start.  Check out our post on Gamestop if you’re curious about short selling.

A slow start

In the last week of January, the S&P 500 dropped 3.8%, causing the first month of the year to start off in the red.  https://finance.yahoo.com/quote/%5EGSPC/history?p=%5EGSPC).  With our daily managed process, we bought some positions “on sale” as the market dropped to end the month. Our global Social Media stocks have especially helped. We encourage you to review your statements and call us with any questions.

February is thankfully off to a great start and buying low last week is benefiting our portfolios so far.  We continue to have a good sense of optimism about the market for the following three reasons:

  1. When the market looks at corporate earnings, they always compare year-over-year.  For most companies in the S&P 500 and DOW, it should be easy to beat the Covid wrecked earnings reports of 2020 year-over-year. 37% of the S&P 500 have reported their 4th Quarter earnings, and so far, 82% have exceeded expectations on an earnings per share basis.  This is good progress (Source:  https://www.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_012921A.pdf)
  2. The Covid vaccine is being distributed as we speak, and President Biden is aiming to have 100 Million people vaccinated in his first 100 days. So far it has given people hope for a more “normal” 2021.
  3. Historical data tells us that between the ages of 35 and 54 is when people spend the most money. That is when many people rise up the corporate ladder, get married, buy houses, and have kids. In the 1980’s and 1990’s the baby boomers were the largest 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 1980’s and 1990’s when the Baby Boomers were in their peak spending years.  This should help a lot in 2021 and moving forward.

We will continue to monitor the portfolios daily.  Because of these three points above, our aim for right now in 2021 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.

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 you have had any changes to your income, job, family, health insurance, risk tolerance, or your overall financial situation, please give us a call so we can discuss it.

Thank you for your confidence and referrals!

Bob Wink, Ken Wink, Jim Wink and Zach Bachner

Robert L. Wink, Jr. • Kenneth R. Wink • James D. Wink • Zachary A. Bachner, CFP®
43409 Schoenherr Rd., Sterling Heights, MI 48313
www.summitfc.net • (586) 226-2100 • Fax: (586) 226-3584

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.

Disclosures regarding our performance reporting:  Because some clients are in the 10% tax bracket and others are in the 37% Federal tax bracket, we have decided to report performance before taxes.  If you have a non-qualified account, please feel free to contact us to determine your individualized rate of return after tax. All of Summit’s performance is after our 1.25% advisory fee that is deducted monthly.  Your fees may be higher or lower depending upon the amount of assets invested with our firm.  Feel free to contact us to receive online access so you can see your personalized rate of return.  The Aggregate bond index we use is ticker AGG, and all dividends and distributions earned are reinvested and included in the performance numbers.  The S&P 500 index and Dow Jones index quoted above does not include dividends within the performance.  If a holding within our portfolio does pay a dividend or other income, it is reinvested, so our performance does include dividends.  This report has been prepared from data believed reliable, but no representation is made as to accuracy or completeness. Total return and principal value will vary depending upon the deduction of advisory fees, brokerage commissions, reinvestment of dividends and other earnings or fund charges and because of this, especially if you are a brand new client that was invested in the middle of the month or if you made a deposit or withdrawal in the month, adviser’s clients may have had materially different results from the results portrayed in the performance numbers disclosed. This information is provided to you in combined form, solely for your convenience and ease of review and is not an offer or solicitation to buy or sell any securities. In order to verify that all account values and transactions are accurate, we encourage you to compare the information provided in our statement with the statement you receive directly from your custodian. All written content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. The performance data in this report represents past performance and does not guarantee or imply future results. Current performance may be lower or higher than the performance data quoted in this report.  Because we use bond funds and inverse funds as hedges, there will be months where we underperform the Dow Jones and the S&P 500 index, but also months where we will outperform.  We do our best to manage stock market volatility, but anything is certainly possible.

The returns are calculated using a true daily time-weighted rate of return (“TWRR” as a primary performance return methodology). TWRR is the CFA Institutes Global Investment Performance Standards (“GIPS”) required calculation for managed accounts. TWRR provides a measure of how an account was managed regardless of the dollar value and is unaffected by external cash flows. TWRR is required in GIPS Guidelines for managed accounts for two primary reasons:

  1. Impact of external flows on TWRR: Since an advisor typically does not control the timing or magnitude of investor cash flows, TWRR is deemed appropriate as it isolates performance regardless of the portfolio/account’s dollar value and external flows.
  2. Comparison across portfolios and benchmarks: TWRR can be used to directly compare performance with other portfolio/accounts and is an appropriate metric to use when comparing portfolio/account performance to benchmarks.

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.