Retirement Planning

2020 Portfolio Review and Market Update

by Randy Luebke | Feb 11, 2021

As an Independent Fiduciary Advisory, we at Lifetime are very proud to work with Synergy Financial Management as our primary investment management firm. We are also fortunate to have Synergy’s President, Joe Maas, serve as our CIO.

Periodically, Joe provides us with an excellent update on what has happened to the markets in the recent past and, more importantly, he also shares his opinions on what he expects in the future as well. Below is his most recent update. Enjoy!

Synergy Financial Management
Portfolio Review and Market Update

We are happy to provide you with our 2020 Market review. Please click on the image below to watch the video.

During the fourth quarter of 2020, the US economy continued to recover from the ‘black swan’ recession caused by unexpected global lockdowns over Covid-19. Throughout 2020, global central banks and policy makers were able to stay ahead of the recession with massive fiscal and direct monetary intervention that cushioned the blow of what would have otherwise been a long and drawn-out global recession. As we look forward to 2021 against the backdrop of a continued rise in Covid-19 infections and multiple vaccine rollouts, we are hopeful that 2021 will bring us some return of normalcy to our daily activities.

One year ago, as we welcomed the first quarter of 2020 and the excitement of a presidential election year, no one could have imagined the shock the global economy was about to receive from a microscopic enemy, the Covid-19 virus. By the end of Q1 we were in the grips of a US economic shutdown and the S&P 500 had cratered more than 30% at the lows. During this time, smaller cap names led the decline along with energy, utility, financial and commodity related names. Treasury yields had collapsed along with entire spectrum of the yield curve to record lows and equity risk premium spiked overnight to levels we had not seen the height of the financial crisis. By the end of Q2, the financial markets had become confident in global central banks and policy makers interventions and the markets were in the midst of a remarkable recovery led by the ‘stay at home names’ and mega cap technology stocks. The top 5 names by market capitalization in the S&P grew to just shy of 24% of the weight in the S&P 500 and delivered nearly all the recovery returns. During Q3, financial markets began to see more evidence of an economic recovery. The broader ISM Manufacturing Index along with regional gauges of manufacturing activity began turning from contractionary to expansionary, triggering a rotation into value names and those companies more sensitive to the underlying economy. By the end of Q3, the mega cap technology leadership took a pause in favor of a more broad-based recovery led by smaller cap names and those value names more sensitive to the underlying economy.

Q4 of 2020 ushered in the presidential election along with new hopes for a Covid-19 vaccine, a fresh round of fiscal stimulus and direct monetary intervention. Our stance was and continues to be regardless of which party wins the presidential election or whether Democrats are able to take control of the Senate, we believe that the likelihood of future stimulus spending will ultimately outweigh the increase in both regulations and taxation resulting from a Democratic majority in the house and senate. As a result, we maintained our positions and exposures throughout Q4 of 2020.

Synergy Financial Management Portfolio Review 02-11-2021 image chart 1

Synergy Financial Management Portfolio Review 02-11-2021 image chart 2 v2

As we look forward to 2021, we acknowledge that the world continues to evolve at an increasing rate. Business, technology, and behavioral changes born out of the Covid-19 era of 2020 are here to stay and permanently shifted the way we work with and interact with each other. Industries such as work from home technology, biotech, online retail, online payments, streaming video, online gaming, home fitness and home delivery services have permanently shifted the demand for both computer software and hardware technology. Cloud computing, broadband capacity including 5G, cell phones, wearable technology, internet of things, and collaborate software and hardware advances in turn have shifted the demand for semiconductors such that 1 trillion chips will need to be manufactured over the next 12 months. With an estimated global population of 7.8 billion, demand for 1 trillion chips translates to a staggering 128 chips needed for every man, woman, and child on earth. We remain on the leading edge of these changes and have positioned our portfolios accordingly to capitalize on the evolutionary shift in technology underway as we speak.

As always, the team at Synergy Financial Management is continually monitoring market movements.

Information contained herein is based on data obtained from sources believed to be reliable, however, such information has not been verified by Synergy Financial Management, LLC. The information provided has been prepared and distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy or an offer of advisory services.

IMPORTANT

The information contained in this newsletter is for general use and educational purposes only. For more specific and detailed guidance, or help with implementing these and other financial strategies, please view the links below.