Quarterly Commentary – January 2021

Events of January 5 and 6 were dramatic and may have a significant impact on American politics and all our lives for years to come. Some will say for the good and others are fearful, either way change will come.

First and much to the surprise of most pundits, Georgia elected 2 Democrat Senators giving U.S. Senate a split of 50 Republicans and 50 Democrats and with Vice President Harris casting any tie breaking votes effective control of the Senate moves to the Democratic party thus giving one party the control of the White House, House of Representatives and Senate. While some are painting this as a dramatic change reality is that single control of all both branches of government occurs has since 1933 happened many times and government has effectively functioned. Some may have not liked the results, but nonetheless one-party control did not lead to the end of our country. This may sound a bit dismissive to some but in reading periodicals from many different years (my personal library has a collection of over 2500 newspapers and magazines covering the past 75 years) you can always find those that are claiming that the sky is falling.

Second and perhaps of greater significance were the events of January 6 which began with a defeated U.S. President speaking before a group of tens of thousands of supporters and making claims that he had “won the election in a landslide” and that “No one until I came along knew how corrupt our elections are”. He asked them to “Stop the Steal” and claimed this past election was “most corrupt election in our history and maybe the world”. Donald Trump Speech “Save America” Rally Transcript January 6 – Rev. Very bold statements if one were on the campaign trail but hardly words that would be expected from a sitting President of the United States. We all know what followed with the rampaging of the U.S. Capitol Building and deaths of five people. An incredibly sad day for America.

However, what happened to the financial markets? Miraculously the Dow Jones Industrial Average gained 679 points or 2.2% from the morning of January 6 to the close of January 7. This leaves many scratching their heads as to what is going on? A perfect transition to this memo as written on January 3, 2021.

2020 is behind us. Thank Goodness! COVID-19 created much havoc and hardship in the world, but we did survive. From the gloom and doom of March 2020 when the stock market had collapsed (Standard & Poor 500 Index fell 34% from February 19, – March 23*), unemployment peaked at 14.7%** and the thought of a COVID-19 vaccine by the end of the year was met with great skepticism.*** So, from those dire days of March-April came the actual results of this year. So, what did happen?

  • Stock market (as measured by the S&P 500 Index) rebounded 68% to finish the year up 16.26%
  • Unemployment rate at the end of November was 6.7%
  • Number of COVID-19 positive test in the U.S. – 20,346,372 (as of January 3, 2021)

Number of COVID-19 related deaths in the U.S. – 349,246 (as of January 3, 2021) https://covid.cdc.gov/covid-data-tracker/#cases_casesper100klast7days


  • U.S. Population 330 million people
  • COVID-19 infections as a % of U.S. Population – 6.16%
  • COVID-19 Deaths as a % of infections 1.71%
  • COVID-19 Deaths as a % of U.S. population – .10%

Each death is significant and profoundly impacts a loved one’s family. There is no doubt about that and in measuring the statistical impact of COVID-19 I am in no way seeking to diminish the pain and grief that impacts COVID-19 impacted families.

(On a personal note, I know 5 people who contracted COVID-19, unfortunately 2 died and 3 recovered) Our goal here is to fly at 30,000 feet and review the economic impact of COVID-19 and its impact on your investment portfolio and the bottom

line is that financial markets held up and for those that stuck to their investment allocation model throughout this time frame did well.

What really blew the doors off in 2020 was the technology space and investors in the NASDAQ-100 did exceptionally well gaining over 48%****. Stocks like Apple, Microsoft and Amazon powered that index with each gaining over 40% for the year and companies like Tesla breaking out in the stratosphere up over 700% in the past year. This goes to prove the adage that for each person’s lemon someone else will find lemonade. From what looked to be the ashes of March gave way to tremendous opportunity.

What powered all this growth? In our opinion the following,

  • Continued low interest rates resulting in little competition for stocks and the ability for companies, governments and homeowners to borrow at historically low rates.
  • Ongoing recovery of the U.S. Housing market with over 1.5 million new housing starts last year. https://www.cnbc.com/2020/12/17/us-housing-starts-november-2020.html. Home building is such a vital unit of economic growth as the number of jobs created in the construction of a single home. From excavation, to foundation, framing, roofing, appliances, flooring, plumbing, electrical and painting the number of jobs for construction are some of the most vital in our economy.
  • Tax Reform of 2017 and lower corporate income tax rates. Without getting in the political discussion of whether those tax cuts were “proper” the reality is that U.S. companies paid less in federal income taxes (companies of all sizes, not just the top 100) and therefore corporate earnings grew from 2017 forward. This allowed for buybacks of company stocks (thereby shrinking supply), increases in corporate dividends, purchases of capital equipment and bonuses to corporate employees. Yes, all arguable but still the result of lower corporate taxes and the resulting favorable impact on economic growth and stock prices.
  • Continued global growth. COVID-19 hit Asia first but so did the recovery. Again, regardless of the “why” the reality is that the fear of long broken supply chains did not materialize, and China, South Korea, Thailand, Viet Nam and Indonesia recovered quicker from the Pandemic as opposed to the U.S. and Europe. In fact, China and Viet Nam both posted positive GDP growth in 2020. https://www.weforum.org/agenda/2020/10/asia-multispeed-recovery-coronavirus-covid-economies-economics/

Where do we go from here? Our feeling is the U.S. and world economy will continue to grow. As we have written many times before, not always in a straight line but connecting the dots economic growth does occur. As of this writing Pfizer and Moderna have received Emergency Use Authorization from the U.S. Department of Food and Drug Administration (FDA) as well as the Oxford/Astrazeneca approval in the United Kingdom and from Sinovac in China. Johnson and Johnson and Novavax are in Phase 3 trials. By the end of June there should be 100’s of millions of people around the world that will have been vaccinated. This will not end the Pandemic as there are over 7 billion people in the World. As Bill Gates has said the industrialized world will not be safe from COVID-19 until the poorest countries are vaccinated but the delivery of upwards of a billion vaccines from the number companies that have either developed or developing COVID-19 vaccines will go a long way in allowing the global economic engine the ability to churn ahead.


Past performance does not indicate future results. This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed by LPL Financial. as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. The Standard & Poor’s 500 Index is an unmanaged Index of approximately 500 large US companies. NADAQ 100 is an unmanaged index of approximately the 100 largest market capitalization companies on the NASDAQ stock exchange. Dow Jones Industrial Average is and unmanaged index of 30 companies selected to represent a broad sampling of the US economy.




**** https://www.morningstar.com/etfs/xnas/qqq/performance