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What’s the best thing I can say about 2020?
As a human being, I’d say, “It’s almost over.” As an investor, I’d say, “How long can this go on?”
We’re less than 48 hours from ringing in a new year. To say the least, the last 12 months have been fraught — with so much suffering, so much conflict, so much uncertainty. Indeed, 2021 can’t get here soon enough.
Fitting, though, that, in these waning days of what will soon be the old year, news of a faster-spreading COVID-19 strain in the U.K. knocked markets and pandemic-weary citizens for a loop Christmas week.
Even so, optimism about the future is entrenched on Wall Street.
Thanks to a strong rally from the spring depths, for instance, the S&P 500 Index will close out 2020 with a gain of around 15.85%. The Nasdaq Composite will finish plus-43.76%.
Gains in many alternative assets are even more noteworthy. Gold rose 22.46%. Silver jumped 42.16%. Longer-term Treasuries climbed 17.41%. And cryptocurrencies went ballistic, with Bitcoin soaring 265.49% — beating the S&P by a factor of 16.75 to 1!
In other words, this was the kind of year where Wall Street — and the investor class as a whole — made out great. Main Street — and the working class — had a tougher go of it.
Of course, within the market, some sectors, such as technology and the “work from home” group, soared. Others, like travel, leisure and energy, tanked.
Investors naturally are wondering if these trends will persist in 2021. They’re also expectant that vaccination, which began in December and will gather steam in the first quarter, will finally – mercifully – help us put COVID-19 in the rearview mirror by the second half of the year.
Right now, it’s too early to say if this optimistic scenario will actually happen. But it’s a good bet that at least some money will rotate into beaten-down, underappreciated sectors as the months roll on.
With money raining down on markets and the economy — from the Federal Reserve, the incoming Biden administration and Congress — Wall Street will likely at least start the year with a decent head of steam.
The problem is that of those fiscal and monetary actions come with long-term consequences ... consequences that, ultimately, someday, we’ll have to face.
That’s why this is absolutely, positively not the time to abandon the “Safe Money” investment strategies that have worked so well the last couple years.
With eyes on 2021, let me take this opportunity to wish you the very best and happiest New Year.
I look forward to hitting the ground running in January and navigating us through what will undoubtedly be a fascinating 12 months.
Until next time,
Mike Larson
