President Nancy then introduced PP Stephen Scherer to lead our annual Investment Panel Day. Steve began noting the Panel was started in 1987 when the Dow Jones Industrial Average was 2,700 and today is above 30,000. Percentage wise, the best year was 2019 and continued on through February 2020 when the bottom fell out. Steve’s commentary was salient and to the point. The country experienced three shocks: the COVID-19 pandemic, racial unrest with the shooting of George Floyd and a presidential election that divided the country.
Up until the pandemic, the U.S. had the lowest unemployment rate in history, the wealth gap between the upper and lower segments of society had significantly shrunk and the country had enjoyed a boom like no other. COVID-19 brought forth significant job losses in the service industry (restaurants closing) and women’s employment (schools closing). This brought forth a global Zoom demand and Congress approving a $1,200 unemployment stimulus along with expanded jobless benefits. In May, the second shock occurred when George Floyd was shot by a Minneapolis policeman. Protests were held and curfews were set throughout the country. The country’s unemployment jumped from an all-time low to well over 14%.
The third of the shockwaves occurred as the presidential election led to a political division never seen before in our country’s history. A president who attacked the deep state and bureaucratic norms of Washington D.C. attracted a committed following. But he was betrayed by his own personality as the liberal side of government searched for his ouster. And the election showed the division: a new president, Democrat seats lost in the House and a tie in the Senate.
But during these times, the investment markets continued to rise. By November, unemployment was down to 6.4% and December had one of the strongest monthly gains in stock market history. Unbelievably, 2020 was a great year for investors. Steve reviewed various percentage gains between 2019 and 2020, highlighted by the high-tech NASDAQ percentage gain of 43.6% in 2020 over the 35.2 in 2019.
As 2021 begins, remarked Steve, the economy seems primed for recovery. It is a new normal with retailers operating from home, new start-ups are expanding with increasing frequency, and the COVID vaccine has arrived. This begged the question: When is it safe to begin investing again? Steve answered his own question. Available cash is at 10% of GDP, this only portends the consumer is waiting to spend the money.
Steve then reviewed the results from the prior year projections on Investment Day, featuring the WVRC member vote (club) and investment panel experts (panelists). The DOW was up 7.2% for 2020, the club voted a 10% gain and the panelists 7.1%. Panelists won! The S&P 500 was up by 16%, the club voted 15% and panelists 9%. Club won! And the NASDAQ was up 43.6%, club 10%, panelists 11%. No contest!
Steve then asked for projections for the year 2021. By a show of hands, the Club consensus for the year 2021 was as follows:
- DJIA – Up 11%
- S&P 500 – Up 12%
- NASDAQ – Up 10%
- Treasuries: 1 Year – Up 58 bps; 10 Year – Up 51 bps
Let’s wait for the 2022 Investment Day program to see the financial brilliance of member forecasts.
It was time for the expert panelists to give their personal observations on the markets and their selection of a “Biden” stock for the year 2021.
First up, John O’Keefe, a retired bond trader. John started off with the best line of the day: “Forecasting is a difficult art, especially about the future.” He observed that last year he favored ‘value’ over ‘growth’, but that did not come to fruition. He emphasized the importance that if you want to be invested, stay invested. 2021 will be a good market, with growth over value. He switched! And his Biden stock: Johnson & Johnson, a one-shot vaccine will carry the day.
Up next, Jim Crane, a financial advisor for NY Life. Generally agreed with John on market observations. Jim pointed out the yield on treasury bonds until the Fed sees which way inflation goes. His Biden stock: United Health Care Group. The largest Supplemental Health Care provider with some 23 million uninsured Americans.
Next, Dwight Heikkila, a certified financial planner. Dwight felt most of his thunder was stolen by the previous experts, but did indicate it would be a choppy year. Most salient comment was that US debt was a problem. No kidding! Biden stock: Logitech. You had better listen, his prior year selection, a video company was up 133%. The best of the bunch!
Nancy McCready, a Wells Fargo wealth manager. She offered her two cents worth by projecting specific forecasts. 10 year treasuries up 1.50%, Dow at 32,599, S&P to 4,200 and NASDAQ at 16,000. Biden stock: Clean Energy Fuels Corp.
Then, the guru, Steve Scherer, a lawyer turned investment expert. He observed there will be pressure to keep rates low, but watch out for inflation! His projections in terms of percentage increase: Dow up 7 ½ %, S&P 12 ½ %, NASDAQ 17 ½ %. Biden stock: Qualcomm, as it is well into the 5G market owning much of the intellectual property.
Questions followed, however the one that gained the most interest and response was asked by PP Chris Gaynor: What do you tell clients about investment strategy who are, let’s say, older? Steve answered by saying this is the mitigation issue: how to mitigate risk in your portfolio. He said historically the answer was to buy bonds, so no risk. However, today, short term treasuries, or high dividend paying stocks may be the best choice, but stay the course. For instance, Verizon has a good yield, and a little growth over time.
O’Keefe responded by saying companies with a 3% yield on a dividend stock, provides steady income.
Heikkila favors growth over value is best bet but S&P Dividend Fund is most secure.
Crane pointed out that bank loan stocks are sound since they have convertible features.
All in all, this is always an interesting, fun and knowledge filled program. Thanks to Steve for leading, and John, Jim, Dwight and Nancy for their expert contributions.
YOPP Tom Barron