Dec. 2020 – Markets and Mayhem

What a year! It’s “one for the books” – 2020 served up a host of trials and tribulations, including the impeachment
and acquittal of the President, a deadly global pandemic, mandatory shutdowns and a comatose global economy, riots
that destroyed large swaths of U.S. cities, a return of communist expansion in Hong Kong, a projected $3.3 trillion federal
deficit, and a national election that revealed a bitterly divided electorate.

Oh, and lest we forget, as of this writing the S&P 500 is up by 14 percent since the year began, or four percentage points higher than its 94-year average calendar-year return.

What is an investor to make of this? Is the stock market disconnected from world events? Or is this just another weird 2020 anomaly? (We note that this was also a year in which the national ice hockey championship playoffs began in August – in which a team from Florida ultimately triumphed over a team from Texas).

Rest assured capital markets are functioning properly. A stock’s price represents investors’ collective estimate of the firm’s expected future earnings discounted to the present. In other words, market indexes change with earnings expectations. The ride to 14 percent has hardly been smooth, as expectations were jolted repeatedly. To wit, in mid-March, the market fell by 18 percent in just 10 trading days following declaration of a national emergency — but recovered those losses only twelve days later, after the CARES Act promised support for businesses.

Markets also reflect good news that the media ignores. Prior to the pandemic, economic growth was robust and personal income was rising at all income levels. Amidst quarantine and closures technology ensured delivery of goods to our doorstep on a massive scale. Pharmaceutical firms and governments collaborated efficiently to research and deliver vaccines. SpaceX has achieved remarkable feats. These and many other developments offer hope for future prosperity.

Also In this Issue

The Pre-Retirement Checklist: Estate Planning Basics
Optimizing College Financial Aid
Protect Your Records Before Disaster Strikes
The High-Yield Dow Investment Strategy
Recent Market Statistics
The Dow Jones Industrials Ranked by Yield
Asset Class Investment Vehicles

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