Happy New Year! We can all agree that it feels good to put 2020 behind us. So many experienced loss in either health, economics, or both. Certainly, the loss of life experienced by many has been overwhelming and our hearts go out to all those who are suffering and/or who have experienced losses.
From an investors perspective, 2020 turned out to be very good. Investors able and willing to invest during the stock market crisis that occurred in February and March of 2020 really had incredible returns as the market recovered and went to new highs. As we enter 2021, the picture is really cloudy. Stocks aren’t cheap based on their earnings and bonds are paying near record low interest (see Notable Number 4 statistic). While earning announcements from publicly traded companies are better than expected given the ongoing pandemic, do those earnings justify the high stock prices?
We are recommending clients circle back to their financial goals. Are you on track for those goals? Due to the significant gains in the stock market in both 2019 and 2020, many investors are ahead of where they thought they would be financially in their portfolios. Now is an opportunity to reassess your risk and how that lines up with your goals. Over the next couple of weeks, our team will be busy working through rebalancing client allocations. In a diversified portfolio, a rebalance recognizes both what has performed well and not as well. Rebalancing is widely considered a cornerstone of a disciplined portfolio management. An over simplified example is a portfolio that has just two investments that initially are held at 50% each. Over time, one of the investments outperforms the other leaving you with an allocation percentages of 55/45 and rebalancing resets the portfolio to 50/50 percentages again. To learn more about the benefits of rebalancing click HERE for a well-written article from Investopedia.
The Weekly Market Review gives a high level summary of the recently passed COVID-relief bill, the stock market’s long and successful history, the death toll resulting from the virus and as always, some very interesting Notable Numbers.
As always, we hope you find the WMR both informative and interesting.
Have a great week!
Trevor N. Coe, CFP®