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PartnerTalk®

2020 and Beyond

by Fred Snitzer

PartnerTalk® // Posted on January 14, 2021

Mercifully, we have come to the end of 2020. What can be said about this year that has not already been said, or will soon be said? 2020 will unleash a torrent of words from thousands of writers about its meaning, lessons, and implications for the future.

We are not philosophers or historians. We are investment advisors, and as investment advisors we can say that the investment lessons of this past year are obvious, but a year like 2020 illuminates and sharpens the wisdom of these ideas like only real life can. These are the same lessons that this firm has been advocating for almost 40 years:

  • We can’t predict the market
  • We can’t time the market
  • Diversification is critical
  • Know yourself; know how much risk you can really handle

We think these ideas will apply equally to 2021. Given the year we just lived through, it’s hard to fathom how anyone could make a confident prediction as to how the year will unfold. Furthermore, in the context of a pandemic, does the turn of a year really matter? Does the virus care that the year just changed?

Here is another investment lesson from 2020: markets are inherently a human activity, and human beings are susceptible to fear, rumors, panic, conspiracy-theories, worst-case projections and pollyannaish denial.

The onset of this virus created a fear that was palpable. Many of us, when we think about the early stages of this pandemic, can remember a precise moment when we felt this fear. For me, my most vivid memory is walking down the aisle of an Acme in my neighborhood in mid-March, wondering if I was risking my life, when I saw a man pushing a shopping cart overflowing with groceries, wearing a mask so elaborate and forbidding that it looked like he walked out of the trenches of World War I. The look of fear in his eyes was clear: stay away from me.

In retrospect, I can see that the fear of my fellow shopper and I was a little overblown, to say the least, but we did not know it at the time. And this fear and uncertainty was not confined to an Acme in Narberth, PA; it was everywhere, including financial markets worldwide. We know that even markets can be moved by the collective zeitgeist of billions of people.

The way in which the markets were driven by public health issues in 2020 could very well continue in 2021. Now it seems we are in a race between a new, more contagious version of the virus and the roll-out of the vaccine. A recent article in the Atlantic Monthly stated: “……the speed of the vaccine rollout is of enormous importance……Vaccination of a broad population, not vaccines in and of themselves, saves lives, and epidemics are fought with logistics and infrastructure.”

There will be other drivers of the market – the Georgia election, tax policy, geo-political concerns – and then there will be the things that catch us completely unaware, just as we were in March 2020, in what seems like an eternity ago.

Life is unpredictable and so is the stock market. Expect to be surprised. But this does not mean we cannot be realistically optimistic. Johan Norberg, author of “The Story of Human Progress”, points out that if this virus had emerged as recently as 2005, we would not have had the technology to create mRNA vaccines; in 1990, there would have been no internet to share information or allow for remote work; in 1976, no ability to read the genome of the virus; and in 1950, there would not have been a single ventilator.

Investing in markets is an expression of belief and/or faith in the continued resiliency, stability, energy, and ambition of the citizens of the United States and the world. True, during 2020 there were many examples of mis-management and public health failures, and there is no denying the awful public toll of this. But we are thankful for the things that worked: for the technology that allowed some of us to continue to work and to see family and friends; for the courageous front-line workers – the doctors, nurses, grocery store workers, garbage collectors, truck drivers, meat-packing workers, fireman, police officers – for really anyone involved in the complex and essential supply chain that kept us fed, clean, protected, and healthy during a scary time; and for the scientists and managers at the pharmaceutical companies, who created a vaccine in record time. All of these individuals deserve our gratitude.

Let’s not waste any more words on 2020. As the Buddhists say: “The past is already gone, the future is not yet here. There’s only one moment for you to live, and that is the present moment”. Or, if you prefer your life lessons from the Sopranos: fuggedaboutit.