Investment Outlook: Fourth Quarter 2020 Market Recap
I won’t even attempt to recap all that has occurred over these past twelve months—there will be entire books written on the subject. So much has changed in such a short time, that I found myself needing a bit of a refresher just to make sure I could keep everything straight. I also want to preface all that follows by saying this is written entirely in the context of the markets and the broader economy. There are countless issues more pressing that fall outside the narrow scope of this article and we want to be mindful of them as well. That said, I took a look back at the last four quarter-end recaps and was truly amazed at how drastically the changes in overall tone and sentiment shifted from one quarter to the next. Below are a few of the high-level themes from those recaps starting with the close of 2019 and working forward:
4Q19: Wrapping up a year to remember with the S&P rising 31.5% (best since 2013) and an economy firing on all cylinders. Unemployment at all-time lows, minimal inflation, and a strong outlook for global growth in the years ahead.
1Q20: COVID strikes - the beginning of nationwide lockdowns, global travel restrictions, job layoffs, canceled sports seasons, etc. Daily percentage declines across asset classes unimaginable only a few short weeks ago. Markets ended off down 20-25%.
2Q20: One of the best quarters in the market’s history on the heels of unprecedented monetary and fiscal stimulus. S&P up 20%+ and the tech-heavy Nasdaq up 30%, in a single quarter.
3Q20: Increased volatility, rising uncertainty surrounding the economic recovery, endless political gridlock. Big up days, big down days, netting to a 9% gain in the S&P.
A friend of mine may have said it best: “This last year has been the longest decade of my life.” Sometimes it honestly does feel like we’ve lived through multiple different eras wrapped up into a single year.
Throughout all these challenges, setbacks, headwinds, successes, and triumphs, one thing that has remained constant is the remarkable ingenuity of the world’s greatest companies run by some of the world’s greatest managers. Home Depot learned how to transform its retail strategy to support the sudden boom in new-home and renovation demand, both online and in-store. Disney, despite having their theme park and production businesses throttled by the pandemic, transitioned aggressively into streaming, and now control one of the most popular streaming platforms in the world. Apple adjusted supply chains, managed a massive remote workforce, and dove head-first into virtual press events to orchestrate one of the most successful product launch seasons in the company’s history. I could go on and on.
Of course, some particular businesses and industries were much more impacted than others. And many others may not make it through to the other side. But even in those most extreme circumstances, we have shown time and time again our ability to get back up and continue moving forward.
Now, as we start to close the door on 2020 and begin looking forward to 2021, we face a whole new set of challenges, headwinds, and opportunities. Challenges in getting vaccines out quickly to those who need them most. Potential headwinds resulting from lingering strains on the economy and a stock market that has priced in perfection. And, opportunities created in the birth of entirely new industries generating momentum behind more than a few promising trends.
At times it may be difficult to keep track of all these moving pieces but if anything is clear, it’s that there is a lot of hope for better times ahead. Moreover, I firmly believe we are selling ourselves short by simply “hoping.” We will figure it out; we always do. And when we do, we will most certainly be better for it.
From all of us at Beese Fulmer, we wish you a healthy and happy new year!