Financial Planning in the Time of Covid
I can’t believe it is December already. In some ways, the year has flown past; in other ways, it seems like an eternity. Decades from now, we will be regaling the bored grandkids with tales of 2020, how we fought the raging pandemic with bare knuckles, walking uphill through two feet of snow to nowhere because we were not allowed to go anywhere.
But get through it we did, and as difficult as it has been to plan for our financial futures at a time like this, we have relied on our financial plans to guide us through the turmoil. As one surprise followed another, we tried to maintain our discipline and keep our eyes on our long-term goals.
I love history.
For one thing, you quickly realize there is nothing new under the sun. We have been here before. In 1918, as World War I ended, we were hit with a global pandemic called “the Spanish Flu.” After the first modern and horrific war in which modern weapons killed tens of millions, we had to have a horrible disease kill tens of millions more (we are still not sure how many). As bad as Covid-19 might be, I am grateful to be here today.
How do we explain these strong equity markets at a time like this?
As always, markets surprise us. The big problems and big gains often happen rapidly and always happen unexpectedly. As Covid cases surge and in the aftermath of the election and the vaccine announcements, global equities just had the best month in a long time.[i]
While the S&P 500 rose almost 11% in November[ii], the bigger story was the smaller story, as the beaten down small cap stocks continued to outperform. The Russell 2000 small cap index just had its best month ever, rising 18.4%![iii] Value and international stocks outperformed as well. Investors who had the discipline to resist chasing the “Big Tech” stocks are having a great quarter, finishing strong coming into the last month of the year.
A strong finish to remember: Seabiscuit
Following WWI and the Spanish Flu came the “Roaring 20’s,” a time of great prosperity and wild excess, but it ended all too soon, and the great depression ensued. The Twentieth Century was proving to be painful and difficult, to say the least.
But during some of the darkest days of the 1930s came a moment of triumph, a ray of sunshine for a people desperately in need of cheering.
Seabiscuit, the so-called “little horse that could” burst onto the scene and captured the heart of America. He was the subject of a great book and a great movie. He had many great moments, but perhaps his finest was the 1938 match race against the undefeated Triple Crown winner War Admiral. I never tire of it!
[i] Randall, David. “Global Stock Markets Slide at End of Record November.” Yahoo! Finance, Yahoo!, 29 Nov. 2020, finance.yahoo.com/world-stocks-boast-record-breaking-002219250.html
[ii] Source: Morningstar Direct, data as of 11/30/2020
[iii] Imbert, Fred, and Yun Li. “Dow Falls More than 200 Points to End November, but Still Posts Biggest Monthly Gain since 1987.” CNBC, CNBC, 30 Nov. 2020, www.cnbc.com/2020/11/29/stock-market-futures-open-to-close-news.html
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