- Chip Barnett
The Big Picture
The “2020 in review” montage videos are going to be longer than usual this year. My brain has been saturated with “breaking news” alerts on the tv and my phone, and “did you hear” from my friends. Two of my kids go to summer camp where screens aren’t allowed, and boy, I think more adults could use that kind of escape. We investors need to remember the big picture.
So I’m not going to break any news here today. In fact, I’m going to try to reassure you.
Ready? Here goes: stocks and bonds have been doing just fine since the end of the second quarter.
Markets have sifted through Covid data, foreign and domestic, and the phases of vaccine/therapeutic trials; markets have analyzed the global economic collapse and the recovery, shaped like a V/Nike swoosh/K; they have read details of enacted and proposed fiscal and monetary stimuli, and obviously, here in the U.S., calculated the impact on the future of the present campaign promises.
And markets were stable.
I could drill down into what policy successes and errors we’ve made this year, and my concerns over deficit spending.
Instead, I’m going to predict that economies and markets will continue working after November 3, and into 2021. Elections will have winners, Covid will worsen in winter, and treatment of it will improve. Economic and social policies will be introduced, amended and discontinued. There will be stimulus in some areas, cuts in others, and on net, government spending will be higher than tax revenue collected. Business as usual.
As long as interest rates remain so low, there’s a compelling argument that new investment dollars go into stocks. Investors may remain optimistic that the recession is in the past, and propel stocks higher in 2021.
Or, we may find that a Covid treatment is imperfect, consumer sentiment languishes and stocks don’t match the positive returns of recent years.
I’ll leave you with a big picture of the big picture, the average S&P progression over the course of every year since 1928:
2021 will present its challenges. There will be ups and downs in the markets. A diversified portfolio, even with low-interest rate bonds, is the smart approach.