Markets dropped with record velocity from the end of February through most of March.
The unknowns of the pandemic caused many to panic or want to end the pain by selling in hopes of preventing further downside.
We did have some number of clients who saw the drop as an opportunity to put more money to work with some even going through the process of refinancing their mortgages, or borrowing equity in their homes in order to get more capital working.
The market does not like uncertainty and when you have periods of heightened uncertainty, volatility spikes commensurately. As more information about the virus became available, along with the associated economic impacts of it, markets recovered, not only well, but to new record highs.
2020 wound up being a strong year for stocks—absolutely phenomenal for some baskets of stocks.
We came into the pandemic in the most solid and stable economic environment in over 50 years. It’s hard to conceptualize 50 years’ time but it’s fascinating to think back at how much has changed in the world over 50 years. Things never dreamed of have become reality with some changes good for most, while others challenge further progress. The U.S. stock market has increased tenfold in just 30 years. Over a billion people have been lifted out of poverty over the last 25 years, a direct result of global economic progress.
There have certainly been some big winners over the last year but also some big losers. While some businesses are doing better than ever, others are struggling to survive or have already closed their doors forever. It’s hard to take in and reconcile the differences.
Much of the economy recovered very quickly from the initial shock and lockdown while many are still out of work and hopefully getting help from the government, family or their community.
The stock market is the most efficient consensus machine ever developed and it remains at highs even with all we face in the coming months.
No one and nothing can predict the future so the outlook can change, but we remain committed to controlling what we can for our clients, which is to work with them to consider safety and liquidity needs while remaining invested for the long-run, usually for at least a few decades.
As always, we appreciate the trust you put in us to manage your investments. We are always available for a conversation should questions arise.
Erik S. Wolfers, MBA, CFP®