As 2020 (finally) draws to a close, we want to take a look back at what happened this year, and what we've learned for the future.  Alex Cabot starts with a look back at a volatile 2020 in the markets.

• After a strong performance in 2019 and a few minor bumps in January, the stock market was doing well throughout the first few weeks of February.
• S&P 500 hit a new high on Feb 19th…COVID was a minor concern, but investors weren’t too nervous about it yet.
• Toward the end of February, all hell broke loose in the markets.
• According to data from FactSet, from February 19th to the end of the month, the S&P 500 lost nearly 13% in one of the quickest “corrections” I’ve seen (7 trading days).
• The next week was choppy, but the S&P 500 gained back 0.6% with an average daily % fluctuation of over 3%.
• Monday the 9th of March brought further turmoil to the markets when OPEC started an oil-price war with Russia.  That week saw the S&P 500 enter “bear market” territory (a drop of 20% or more from most recent high)…the quickest “bear market drop” we’ve seen.
• When the dust settled on March 23rd, the S&P 500 had lost just over 1/3rd of its value in 23 trading days.
• The average daily % move in the S&P 500 during this period was 4.2%...over 5 times more than the long-term average.
• Businesses were temporarily closed, millions of people lost their jobs, kids (and parents) had to adapt to “virtual” learning…it was gloomy.
• On March 24th, in response to the high likelihood of a stimulus bill making its way through Congress, the markets rebounded, with the S&P 500 gaining almost 10% in a day.  By the end of that week, the market was now only off 23.7% from its most recent high.
• Volatility stuck around for a while, but investors were slightly more optimistic. April, May, June, July, and August all resulted in solid gains.  On August 18th, 6 months after the previous peak, the S&P 500 (almost unbelievably) hit a new high.
• Markets bounced up and down in September and October, but closed November strong and as of December 8th, are over 9% higher than their February peak.

What can we learn from all of this?

• In the short-term, markets are unpredictable
• Bailing out at the wrong time can be a real problem
• Money always has to flow somewhere
• When rates are low, equities are more attractive…and when rates are really low, there’s not much of an alternative for intermediate to long-term investors.

If you had told us on January 1st what was going to happen this year…not in the market, just in the world…and then asked me to predict where the S&P 500 would be in December: let’s just say we would have been way off. No matter what our emotions tell us, we need to recognize that a well-developed financial plan takes years like 2020 into account when determining the strategy.  Those who had a plan in place and stuck with it this year most likely profited from staying the course.  And looking back at every tumultuous period I’ve seen in my career, that truth is evident. 

In the second half of today's episode, Ed Lambert looks at what we've learned about ourselves and society in general this year.

-Fair to say that we have all been affected emotionally by this pandemic.   Since early in the year, we’ve all had to live with uncertainty that we’re not used to.

• Shutdown orders (almost 3 months in PA)
• Kids out of school for the spring/ some remote and hybrid now
• Abnormal feeling of not leaving your house for extended periods
• Remote Working
• Business owners (like us) have had to learn how to lead and manage people you aren’t with all day
• Many people spent their first Thanksgiving without visiting family.   Many more will do the same for the end of year holidays.

We’ve also learned that we are all very resilient.  Whenever there is a crisis, we learn that we can handle more than we think.   

• We’ve all adapted our schedules and habits.
• Businesses have learned to adapt to survive (and sometimes thrive).   Some have pivoted their business models in ways that have created record profits.
• Shopping has shifted in a way such that many more people shop exclusively online now.
• The trend was already underway, but the pandemic accelerated that
• Santa is a big fan of Amazon.
• Business technologies like Zoom have allowed people to stay connected and created amazing new capabilities for businesses.
• In our own business, almost all client meetings since March (including on-boarding of new clients) have been remote using Raymond James’ Zoom technology

Modern Science is absolutely remarkable

• Two vaccines FDA approved(hopefully) less than 1 year from discovery of this virus
• Fastest vaccine development in history up until this point- Mumps took 4 years in late 1960’s
• Historically, mass vaccination happens well after the pandemic and helps to wipe out remaining clusters
• This time, we hope that vaccines may actually shut down a pandemic while it is in full effect.

We’ve all seen that healthcare workers and truly essential workers are true heroes. They’ve kept millions of people alive while putting themselves in harm’s way. They’ve kept society running so that we all have food to eat.  We owe them all a great debt of gratitude.   We believe that they absolutely deserve to be at the front of the line to get vaccinated along with people in nursing homes.   At the close of our episode, Jag shares a story of a friend who works in a supermarket - and what a difference essential workers are making.

Birch Run Financial Website: https://www.raymondjames.com/birchrunfinancial/

Email Birch Run Financial: [email protected]

Call Birch Run at 484-395-2190

You can always email Alex and Ed at [email protected] or give them a call at 484-395-2190.

Or visit them on the web at https://www.birchrunfinancial.com/

Alex and Ed's Book: Mastering The Money Mind: https://www.amazon.com/Mastering-Money-Mind-Thinking-Personal/dp/1544530536

Any opinions are those of Ed Lambert Alex Cabot, financial advisors, RJFS, and Jon Gay, and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. The examples throughout this material are for illustrative purposes only. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional. Diversification and asset allocation do not ensure a profit or protect against a loss. Past performance is not indicative of future returns. CDs are insured by the FDIC and offer a fixed rate of return, whereas the return and principal value of investment securities fluctuate with changes in market conditions. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. Stock Market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise. Investing in small cap stocks generally involves greater risks, and therefore, may not be appropriate for every investor. The prices of small company stocks may be subject to more volatility than those of large company stocks. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Birch Run Financial is not a registered broker/dealer and is independent of Raymond James Financial Services. Birch Run Financial is located at 595 E Swedesford Rd, Ste 360, Wayne PA 19087 and can be reached at 484-395-2190.

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