4TH QUARTER EQUITIES
Equity Market: The market was strong in the first six weeks of the year, continuing the bullish trend seen in most of 2019. Then the coronavirus panic hit as business around the world came to a standstill. The overall market lost nearly 40% of its value in a five-week period. The low point for the S&P 500 was on March 23. Then investors regained confidence as the Federal Reserve and Congress responded with massive packages of monetary and fiscal stimulus. The market leaped back in April and May and then fluctuated in subsequent months, especially September. The fourth quarter was strong with the announcement of vaccine developments. The vaccine news overpowered the political controversies about the outcome of the November elections. Both the Dow Jones Industrial Average and the S&P 500 ended the year in record territory. The Dow moved ahead 7.7% to 30,606. The S&P 500 as up 16.3% to 3,756. The Nasdaq Composite index was ahead 43.6% for the year – its best performance since 2009. The Russell 2000 index of small stocks was up 18.4% for the year. So far in 2021, the market has slowed based upon some tough economic news and the high level of virus cases.
Preferred Equities: We have always been supporters of value stocks. Compared to growth stocks, they often have higher quality balance sheets, trade near or at a discount to their book value, and are less expensive to buy. Many of these stocks will do extremely well in the post-pandemic period and we are looking now at those opportunities. Some sectors have our special attention:
CONSUMERS: The consumer staple companies are a base in this situation. The discretionary companies have promise as more people eventually get back to work. The Federal stimulus payments should assist consumer confidence.
INDUSTRIALS: President Biden supports infrastructure investment which should create opportunity for certain industrial companies – especially those that enhance productivity and power management.
HEALTHCARE: We are very interested in the developments in biotechnology.
TECHNOLOGY/TELECOMMUNICTIONS: Most technology companies have next generation products in development. But we must be careful with certain tech names that are in “bubble territory.” Our focus is on nonbubble names. ENERGY: Clean energy companies have growth potential.
INTERNATIONAL: Emerging markets may come out of the pandemic with renewed vigor and growth trajectories.