February 2021 Market update

You may have noticed that you got no regular newsletter from me last month. I’ve always told my clients that I write my newsletter myself and so everything in it is what I believe and you can trust it didn’t come from any newsletter mill like most financial newsletters from most financial advisors do. I normally write my newsletter at the end of the month so I can analyze and give you the latest data and give you as up-to-date information as I can. But that didn’t happen last month. Let me tell you why.

On December 28th my wife was feeling bad, so I took her to our doctor for a COVID-19 test. I felt great and came back to work. Fortunately, Ginny and Cindy were taking a vacation day, so they were not in the office that Monday. And since Christmas was the Friday before, none of us had been together since Wednesday, the 23rd. Pamela was here that day, but we stayed far apart. Since everyone was coming in the next day, Cindy convinced me that I should not come in until we got Wanda’s result back. The next morning I started feeling a little sick. At the end of the day we found out Wanda was positive, and that meant I was, too.

I got about as sick as I can ever remember being. But my strength has greatly improved and I’m now back at work. I still have some vertigo from it and I’m taking some physical therapy. One good thing is that I lost about 25 pounds, which I hope I’ll be able to keep off.

Since then there has been some sickness in the office, though no one has taken the COVID virus. But we are still here, still supporting our clients with world-class service, and still making our trades when they are called for by our research.

We look forward to the vaccine being completely distributed to everyone who wants it, so we can start meeting with you again. There is a lot that has gone on since most of us last met. We have a new president and Senate control has changed hands. It’s left to be seen how the economy will be affected by the new policies that will be coming out of Washington. So far, the stock market appears unaffected, except by the GameStop scandal (see my narrative on that in my Nature of Humans column). We remain vigilant because we know that a single piece of information could start a downturn that could turn into a crash. Anyway, I just wanted to catch you up a little bit on what has been happening here.

2020, for the tremendous scare we got at the beginning of the pandemic, the year turned out pretty good for stocks. Including dividends, this was the 2020 performance of the four stock indexes we follow;

DJIA 9.76%

S&P 500 17.77%

NASDAQ 44.51%

Russell 2000 19.39%

NASDAQ, as you can see, made 44% in 2020 after a 36% showing in 2019. And I am very impressed with the Russell 2000, an index of small companies more likely to be hurt when the economy was shut down, turned in a performance of over 19% for the year. That is especially remarkable because it was losing money all year until November. If we learned anything it was how resilient the stock market is. At the end of January we learned that there can also be corruption in the stock market. Just like there is corruption in law, in medicine, in sports, in religion, in government, in just about anything in which one human endeavors to gain an advantage over another human. However, that does not make investing in stocks corrupt just like law, medicine, sports, religion or government. It’s people who are corrupt, not the institutions themselves.

Through January of 2021 the Dow and S&P are down slightly, while NASDAQ and the Russell 2000 are doing well. The last week of January scared a lot of people because the market dropped fast and hard. While that happens occasionally, this time I think the reason was the Hedge Fund/GameStop story that dominated the news for the week.

The stock market does not appear to be dangerously overpriced based on earnings, and the new administration does not seem to have spooked the markets in any way. Our goal, like it has always been, is to try to make the returns of the stock market, while also reducing risk and volatility. We seem to be doing pretty well. We hope to continue.