The Stock Market in 2020: An important lesson for practice owners' investment portfolios

Natalie Schmook

January 19, 2021

Happy New Year! And what an interesting year we're coming into. With 2020 not too far in the rearview mirror, I want to take a minute to look back at the investment landscape over the last 12 months and re-iterate the best advice I have for practice owners saving for their futures.

In a year when where entire economies shut down and unemployment almost doubled from 3.6% to 6.7%, most investors in the stock market experienced a counterintuitive story. Below is a list of the major stock market indices and their annual performance, sorted from best to worst. And if you love charts and graphs, here's a more in depth look at the global markets.

And here, some of the buzz-worthy stocks of the year:

There’s no shortage of surprises in these return numbers. To me, the fact that Pfizer, one of just two COVID vaccine manufacturers in the US was only up 3.2% is astounding. A trendier example is that with this year’s returns (you read it right- the stock price has gone up almost 750%) of electric car manufacturer Tesla has a market capitalization (number of share outstanding x the price per share) that is bigger than Toyota, Volkswagen, GM, Ford, Honda and Nissan COMBINED. I am not taking a jab at Tesla- the technology they are developing may very well change the world as we know it. But today they sell cars.

Fun fact- maybe not surprisingly yesterday Elon Musk (CEO of Tesla) slipped past Jeff Bezos (CEO of Amazon) as the richest person in the world. All from a company that has only turned a profit for 1.25 years. With all that being said:

The biggest stock market lesson of 2020 has been to not try to guess what the market will do.

That statement is larger, bolder, and underlined for a reason. In a year where it would have seemed perfectly reasonable to sell everything and sit in cash, doing so would have missed the 4^th best year in the S&P 500 over the last 10 years. It's certainly defied reasonable expectations about how a country (and world!) that basically shut down for 6 weeks or more would impact an investment portfolio.

I don’t know what 2021 holds. What I do know that most practice owner’s time horizons are long enough to withstand whatever happens next- COVID should be a not-so-fond memory 5 or 10 years from now. And those who have shorter time frames should have their portfolios positioned in such a way that they are subjected to the right amount of risk for their needs.

The moral of the investing story is that having an appropriate mix of stock, bonds and other assets and sticking with it over time (the 2^nd part being the most important) is a more effective strategy than trying to buy and sell indexes or individual stocks based on what’s going on in the economy. Thank you 2020 for the reminder.

The stock market news projections this weekend have been particularly bleak, so if tomorrow we see a downturn, please remember this email, stick with your strategy and keep a long-term view!

Here's to 2021-- it should be an exciting ride.

FOR EDUCATIONAL AND INFORMATIONAL PURPOSES ONLY.

The views expressed here are as of the date of publication and are subject to change. This information should not be construed as investment advice. It is presented for information purposes only and is not intended to be either a specific offer (or recommendation) Hayes Wealth Advisors to sell or provide, or a specific invitation for any investor. Information herein may have been obtained from sources believed to be reliable, Hayes Wealth Advisors is unable to warrant its accuracy.

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