Last week, I came across an article discussing a poll of market “experts” and a survey they completed on their stock market predictions for 2021. For a variety of reasons, I do not believe it is worth repeating a single prediction given. Yes, these people are some of the most esteemed and followed analysts and economists and there are very likely fundamental underpinnings to their thoughts, but perpetuating market predictions around a one-year period runs counter to how we think about investing and the impact that investing has on our clients. Do we really care what markets do in a one-year period of time?
This calendar year has been a challenging one for so many and for so many reasons. However, I believe it provided a fantastic learning opportunity for investors to experience the range of emotions required to be a long-term investor. How did you feel when the market bottomed in March of this year? More importantly, how did you react? Looking back at that time period, I am so proud of our clients’ behaviors and attitudes. We have consistently strived for our clients to think about investing as a very long-term task. If a client holds the performance in calendar year 2020 as critical, you could see how that might drive someone to “play defense” in the middle of a market downturn by repositioning to more conservative assets. “Peace of mind” can be created by selling a portfolio when the world is experiencing chaos and markets are in free fall, but the cost of that “peace” would have proven quite expensive. The market rally since March has been historic in scope and against a backdrop of economic shutdowns, a contested Presidential election, and spiking virus cases. I am certain if we look back at ALL predictions given for 2020, not a single one would have resembled anything like we experienced in 2020.
As we move into a new year, there are ample reasons to be optimistic about the economy recovering. The vaccine has started shipping and most healthcare experts and scientists agree that we are at “the beginning of the end.” However, from an investor standpoint, it is dangerous to assume that an economic recovery automatically equates to higher stock prices. It is possible, if not likely, that markets are already pricing in that recovery, hence the recent rally. Next year is just like any other year for our clients; we position them for a variety of economic conditions and understand that one single calendar year is not the goal. The goal is and always be keeping them on track for their long-term objectives.