Review & Outlook

January 8, 2021

The dichotomy between the strong performance of the markets in 2020 (S&P 500 Index 18.4%) and the hunkered down, pandemic economy was striking, but not completely surprising. For decades now, uncorrelated financial returns have so far outpaced growth, profits, and disposable incomes. And while portfolio results of 2020 left many of us with the uncomfortable optic of having profited in the face of a high human toll, we submit that financial markets are not moral actors but only a reflection of the supply and demand for current liquidity versus future expectations. In shuttering our Service Sector, economic activity fell and pushed up savings. The Federal Reserve’s actions in March (lowering interest rates to zero and supporting Corporate and Municipal Credits) drove bank balances into stocks – and the rest is history. The lesson is that dark circumstances inevitably mean the future is what we have for better times and now valued highly even more.

Review & Outlook

January 8, 2021

The dichotomy between the strong performance of the markets in 2020 (S&P 500 Index 18.4%) and the hunkered down, pandemic economy was striking, but not completely surprising. For decades now, uncorrelated financial returns have so far outpaced growth, profits, and disposable incomes. And while portfolio results of 2020 left many of us with the uncomfortable optic of having profited in the face of a high human toll, we submit that financial markets are not moral actors but only a reflection of the supply and demand for current liquidity versus future expectations. In shuttering our Service Sector, economic activity fell and pushed up savings. The Federal Reserve’s actions in March (lowering interest rates to zero and supporting Corporate and Municipal Credits) drove bank balances into stocks – and the rest is history. The lesson is that dark circumstances inevitably mean the future is what we have for better times and now valued highly even more.