2020 Q4 Market Commentary

I doubt many of us were disappointed on December 31st as 2020 entered history and 2021 was ushered in. The past year has been a tumultuous journey, leaving most of us exhausted and hoping for something better. As was the case in our last three commentaries, we must begin with COVID-19 as it continues to dominate the headlines. Unfortunately, we seem to be in the middle of yet another surge in cases. Hospitalizations and deaths are at their highest points since the pandemic began. Reported deaths from COVID -19 are now averaging over 3,000 per day, and we will have likely hit 400,000 deaths in the United Sates by the time you read this.

Enough bad news – now for the good news. Pfizer and Moderna both have FDA-approved vaccines, while Johnson & Johnson and AstraZeneca have released encouraging data on their vaccines. Dr. Anthony Fauci, one of the nation’s top infectious disease experts, recently stated we could soon have four FDA-approved vaccines. While the vaccine rollout has been slower than many had hoped, vaccines are now being administered across the United States and the world.

Stock markets continued their upward march during the fourth quarter as the rebound from the March 23rd COVID-19 low continued. The Standard and Poor’s 500 (S&P 500), an index of the 500 largest publicly traded U.S. companies, gained 18.4% for the year. Growth stocks were the big winners this year with Large-Cap Growth stocks and stocks of large companies exhibiting above-average growth in earnings, sales, cash flow, etc., returning just over 34%. In contrast, Large-Cap Value stocks, stocks of large companies in more mature industries exhibiting slower than average growth in earnings, sales, cash flow, etc., returned under 3%. For the year, Small-Cap stocks, stocks of smaller companies, and International stocks both underperformed compared to Large-Cap stocks. They returned just over 11% and slightly under 10%, respectively. The fourth quarter of 2020 saw this trend reverse as Small-Cap stocks outperformed Large-Cap stocks, Value outperformed Growth, and International stocks outperformed U.S. stocks. These moves highlight the need for diversification within a portfolio. The market is not a one-trick pony.

The Federal Reserve will continue to play a major role in shaping the economy as we begin to move towards a post-pandemic world. Comments made during the Fed’s December meeting hint they are not expecting a near-term significant uptick in inflation. Their focus will remain solidly on employment and economic recovery. Though jobless claims have continued to fall, they are still almost four times those seen at the start of 2020. Against this backdrop, we saw a $900 billion stimulus package with increased unemployment benefits approved late last year and more stimulus is likely to come.

While equity markets are seeing upward trends, fixed income (bond) yields remain near historic lows. The Federal Reserve has said they have no plans to raise interest rates as the country deals with the pandemic. While there have been corporate bankruptcies in 2020, we haven’t seen the widespread bankruptcies feared by many. The worst-case scenario in terms of bankruptcy, as many feared, would have severely harmed fixed income, which is usually a safe haven for a portfolio.

Any market commentary would be lacking without mention of the current political landscape. The last three months have been emotional and difficult, to say the least. By the time you read this, our country will have a new President while the Senate and the House of Representatives will both have a Democratic majority, albeit by very slim margins. These changes will likely have an effect on future stimulus, tax policy, and healthcare policy, to name a few. How all of this affects the markets and economy remains to be seen. For now, the markets are taking it all in stride.

We remain optimistic that with vaccines being administered and assurances of more stimulus, if needed, the economic recovery will continue. As with any recovery, we will have to deal with continued volatility. We, at Persium, continue to recommend a diversified portfolio to help address volatility. As always, we are here to help with questions and concerns as they arise.

As in previous letters, we leave you with a quote. This time it comes from Mr. Rogers: “Often when you think you’re at the end of something, you’re at the beginning of something else.” As we bid 2020 adieu, we find ourselves at a new beginning in a new year with limitless possibilities. We wish the best for you and your families in this new year.

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Persium Group, LLC  /  6190 Powers Ferry Road, Suite 500  /  Atlanta, GA 30339

Persium Group consists of three teams: Persium Advisors — wealth management for business owners and other investors, NAVIX — exit planning for business owners, and CoVerity — serving the needs of retirement plan committees.

The Persium Group, formerly known as White Horse, is an independently owned and operated firm that was founded in 2004. In 2010, White Horse Advisors, LLC registered with the Securities and Exchange Commission as an investment adviser allowing us to operate in a product neutral, fee-only investment environment.

At Persium Group, we offer three distinct lines of business. Persium Advisors, LLC is an SEC registered investment adviser offering traditional investment advisory and asset management services. CoVerity™ is a brand name through which we provide investment advice and consulting services to sponsors of qualified retirement plans. Through NAVIX®, we provide exit planning services to owners of closely held businesses.
Persium Advisors, LLC and its affiliates do not provide tax or legal advice. Clients are urged to consult their tax or legal advisors to understand the tax and legal ramifications of any actions or investments recommended by Persium.