If an investor went into a bear-like hibernation on Jan 1, 2020 and woke up Dec 31, 2020, they would awake to find another great year for capital markets. However, for the homo sapiens that did not have the pleasure of hibernating from the world in 2020, we know that it was a challenging year – in many ways. My thoughts go out to everybody impacted and hurting.

As it relates to the market, 2020 is a great reminder of two things. First, there is significant ‘noise’ with respect to what ultimately drives equity prices. It is important to be able to distill the ‘signals’ while tuning out the ‘noise’. Second, 2020 offered another example of why I believe it is so important to always start from a place of humility in dealing with Mr. Market – a person will be right more often by willing to be wrong more honestly. John Maynard Keynes said, “When my information changes, I alter my conclusions. What do you do, sir?”

The fourth quarter returns of major indices were approximately as follows:

·  S&P 500 +12%
·  Russell 2000 (Small Cap US Stocks) +31.5%
·  MSCI ACWI Ex-US (International Stocks) +16.5%
·  Barclays Aggregate Bond +0.5%

My comments looking into 2021 will be brief and covered under two umbrellas.

First, we anticipate there will be a tug-and-pull between high equity valuations versus low fixed income yields in the years ahead. In other words, most (or all) of the equity rise in 2020 has been a result of valuation expansion, in large part because of monetary policy. Investors quickly moved back up the risk ladder in response to inadequate fixed income returns. It’s a theme we talked about quite a bit throughout the past six months. However, there is a logical limit to how much valuation expansion can drive markets forward without underlying earnings accompanying it.

Second, in the last few months, as shown in the returns above, we began to see a rotation from the tech-driven bull market into previously less favored areas, such as international, small cap, and value equities. We continue to philosophically believe that it is important to own well-diversified portfolios that include all areas of the market.

As always, we encourage you to call, email, or use our online portal at any time to touch base with us. We are happy to help you with any questions that may arise. I hope you all have a wonderful 2021.


Daniel Schoenecker, CFA, MBA
Chief Financial Officer

Disclosure: Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The MSCI ACWX Index is a float-adjusted market capitalization index designed to track the investment results of an index composed of large and mid-capitalization non-U.S. equities. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index .  The Bloomberg Barclays Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Bloomberg Barclays government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities.