On November 24th the Dow Jones Industrial Average finished above 30,000 for the first time. What an accomplishment in this weird year that earlier saw a near-crash in the stock market after the economy was closed. A pandemic and a very contested presidential election were just two of the weirdities (I know, that’s not a word, but you know what I mean) to happen this year. So for the Dow to cross that mark was truly something special.
When I first entered the financial advisor business in 1983 our industry was celebrating the fact that the Dow had finished above 1,000 for the first time in history (1,047) in 1982. And while it would dip below 1,000 a few times in 1983, it never closed the year below that number again. Even in my first year in the business I was reading the prognostications of “experts” that were predicting a horrible crash of 70% or more. I mean, after all, the stock market “has never been this high,” and is at “nosebleed levels,” and these were “real experts!” I was a novice, I didn’t know a whole lot, I knew I didn’t know a whole lot, so these predictions scared me just like they scared the general public. But, just like most scary stock market predictions today, they were proven false in 1983 and 1984 when the Dow finished above 1200.
In 1985 the Dow ended the year above 1500. In 1986, a well-known financial advisor and author in Houston, Texas, Venita VanCaspel, published a book (Money Dynamics for the New Economy) that boldly predicted the Dow would reach 3000 before the turn of the century, 14 years into the future. Of course, many critics scoffed and said it would never happen. Ms. VanCaspel was off with her prediction by about nine years. It ended the year above 3000 in 1991.
What I’m saying is that if you regularly bet against the ingenuity and the genius of the American entrepreneur you will most assuredly lose most every bet.
I have taken many calls since the election from concerned clients about what would happen to the stock market under a Biden presidency. One client even came in to ask what we were going to do differently from now to inauguration on January 20th. Our answer was that we will continue to follow the daily research we buy and act on the signals we’re given. We are a rules-based, not an emotion-based practice. That has served us well in the past and if we are entering a time of high volatility it will be even more important to follow the rules.
I’m not too worried about a Biden presidency as it relates to the stock market. During the last two Democrat president’s terms, had you invested in the Dow stocks you would have tripled your money under Bill Clinton and more than doubled your money under Barak Obama. There may be higher volatility as politics become more and more polarized, but our investment style and risk mitigation strategies are equipped to handle that volatility.
Beyond a 30,000 Dow, November gave us a good performance across the board. The Dow finished the month at 29639. While it did dip down below the 30,000 mark for the end of the month, it was still almost 12% higher at the end of November than it was at the end of October. That means the Dow moved into positive territory at month-end for the first time this year. In my opinion, that is a stunning accomplishment for a year like we are having in 2020. The S&P 500 was up almost 11% in November, bringing its total performance to a little over 12% for the year so far. NASDAQ came in at an 11.8% increase for November, which means it has returned an eye-popping 36% this year, and continues to be the best performing index for 2020. The Russell 2000 had the best single month performance of any of our indexes, not just for November, but for all of 2020 with an 18.3% showing. This index had been under water all year until now, but with November’s numbers it is finally in positive territory for 2020 with a 9% return for the first eleven months of 2020. However, the Russell 2000 continues to lag the rest of the stock market for the year, which is understandable given that this index is of the smaller companies that have had to bear the weight of the lockdowns of the economy this year. Let’s hope that December will be a good month for stock so we can all celebrate with a little more jingle in our pockets.
It’s difficult to believe I’ve been doing this job for the last 36 years. And that this has been the most prolific time for the stock market ever. It took the Dow from 1928 to 1991 (63 years) to go from 300 to 3,000. It only took 29 years (1991 – 2020) to go from 3,000 to 30,000. How long will it take to get to 300,000? Of course, nobody knows. However, I plan to be around for it. I enjoy what I do for a living. I believe I help people with what I do, so retirement has not yet shown up in my windshield.