Financial Market Update for December 2020

coronavirus vaccine
Posted on December 16, 2020

Jeffrey A. Harrell, CFA | Director of Portfolio Management

Despite the dire warnings of many in the media that a contested presidential election would cause mass upheaval in financial markets, relative calm has ensued. Following the election, the S&P 500 has staged a sharp rally, despite the continued uncertainty surrounding the political fallout of the results. Part of this can be attributed to the positive Covid-19 vaccine news, with health care facilities across the nation already starting to receive shipments of the Pfizer-BioNTech COVID-19 jab. Although we still have a very long way to go to root out the pandemic, these reports are creating optimism that we may have turned the corner and 2021 has the potential to be a nice recovery year for the economy.

With the S&P 500 now comfortably positive for the year, investors are beginning to ponder what the stock market has in store for us next. Many of the lingering concerns remain such as the uncertainty surrounding the jobs market, how we are going to pay for all the stimulus we have enacted, as well as concerns over where tax rates may be headed. All legitimate concerns, but if 2020 has taught us anything it would be that trying to time the market can be extremely detrimental to your finances.

Accordingly, one observation we would like to leave you with as 2020 comes to a close is the stock market is not a single company, but a collection of multiple companies in many different industries. The stock market has been led higher this year by a handful of very popular stocks in the technology space, leaving many other stocks trading at levels well below their historical valuation averages. What is interesting is over the past month you have started to notice a change in leadership, with many of the worst performing stocks and sectors this year suddenly outperforming. It is important to constantly remind yourself that remaining well diversified provides you with exposure to many areas of the economy that perform differently under different circumstances. This should give you peace of mind that if trouble does strike in the months ahead, your portfolio is already built to weather the storm if you remain focused on the long-term.

The statements and opinions expressed herein are subject to change without notice based on market and other conditions. The information provided is for informational purposes only and should not be construed as investment or legal opinion. Please consult a tax or financial advisor with questions about your specific situation. Investors may not invest directly in an unmanaged index or Morningstar Category. Past performance is not a guarantee of future returns. The specific companies referenced here are being discussed for informational purposes only and should not be considered a recommendation to purchase or sell these securities at this time.