Last we wrote in October; we summarized the potential earth-shattering events of November. They included the election, vaccine(s), and stimulus. As self-proclaimed glass half-full guys, we made the point that no matter how painful one or all of these events could be, we would eventually move past them.
As of today, it appears while we are not out of the woods yet, we are on the right side of these issues. We do not pretend to be election or pandemic experts, but we do have a strong belief in this great Country to eventually get things right. Fortunately, as long-term, patient investors we are more than happy to wait till this happens. If the stock market is any indicator, this time around, we did not have to wait very long!
The month of November saw the Dow Jones Industrial Average rally 11.8%... it’s best one-month performance since January 1987. The S&P 500 Index and Nasdaq Composite rose 10.8% and 11.8%, respectively. Through November 30th, the S&P 500 Index is up 13.8% for the year. Quite astounding, considering for the year, the index was down 31% in March. In hindsight, it is understandable that many called this March low a buying opportunity of a lifetime.
So, what has happened to cause such a drastic turnaround? In one word: Clarity! Clarity on all fronts. (Remember, investors hate uncertainty.) While the President is still disputing the election results, the predicted civil unrest amid a prolonged uncertainty of who would be #46 has not materialized. As we head into flu season and Covid-19 cases rise, vaccines are to begin rolling out in the next few weeks (if not already). And lastly, as I write this letter, our tone-deaf politicians are supposedly nearing a compromised stimulus bill.
All of these recent positive developments have provided the clarity many investors need/want in order to put their money to work in the stock market. Maybe they now realize we will not be locked up forever or that our great Country will not be without a leader. There were plenty of earlier positive signs. For instance, while we only hear of the big vaccine developments, there are actual 50 potential vaccines at different development stages. That’s right, 5-0… FIFTY! Got to believe at least a few would succeed… No? A little reading goes a long way… but I digress.
Fortunately for us, we did not need the events of November to invest with confidence. In addition to what we glean from our reading/research, we’ve seen this movie more than a few times over the past two decades. Yes, the storyline and the run time always differs, but the movie typically ends the same. You may not enjoy portions of the plot, but as long as you have enough popcorn to keep you engaged till the end… you’ll be alright!
Looking forward to providing more perspective in 2021. Have a happy and safe holiday!