What we saw happen in 2020, I never fathomed it could happen, but it did happen! Not that there would never be a 40% drop in the stock market in a 4 week time frame or having the stock market roar back from the lows of March ultimately to create new highs only eight months later. What I am talking about, is how all of us were affected by this pandemic and how it caused us to change how we lived, worked, learned, being with friends and family, and going out or not going out to various places and finally the lack of a family vacation.
It also brought many individuals and businesses to their knees, just trying to make it by. Others, struggling with living with Covid and just hoping to live another day. Our first responders have been amazing, but they have been extremely overworked, tired and they have put their own lives and families on the backburner in order to make our world a better and safer place for us.
Our government did something they never did before and choose to shut down the economy in hopes to curtail the spread of this dreadful disease. Our government also provided an extraordinary stimulus package for so many people and businesses. More than likely, another stimulus package is just around the corner in late 2020 or early 2021.
Now with the vaccine on its way, hopefully we can get back to the mainstreams of life. The way life was prior to Covid. However, life will be different moving forward! How long will we be wearing these masks? Will everyone think that when one coughs that they have Covid? What will the ramifications be for so many of us because we had no normal social life and relationships were over zoom type call or phone calls. What effect will this have on our children who missed a lot of school in the beginning and then started virtual schooling. So many questions to answer and we truly will not know what the side effects will be for many years to come.
As for investing into 2021, stick to your financial plan and don’t deviate from it. It’s hard not to when you see some of these technology stocks going up so quickly but many of their valuations do not make sense. Ask yourself, would you pay 1,200 times earnings for a company when typically, a company may sell at 10-40 times earnings? Don’t get caught up on what’s happening today in the market. Keep that long term view and make sure you are putting enough away and let the market do what it will do over the long run so you can reach your goals.
As we move into 2021, we plan to begin to reduce our technology holdings because many of them seem to be selling at extremely high valuations. It is possible that technology valuations at these levels may last a while longer, but a correction will eventually come. We have already started our due diligence process to identify other areas of opportunity, whether it be industries or market segments that we believe will outperform the overall markets. We are also looking at opportunities in fixed income segment of the market. We sold all of our fixed income investments earlier in the year and we are looking at buying back in. We will continue to hold higher than normal levels of cash, given the ongoing market volatility.
I hope you have a very special holiday season.
Yours truly,
Spencer D. Neal, AIF®