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Quarterly Client Update Q4 2020

Unprecedented. Yes, we know the word is overused and you are probably sick of hearing it. We all hoped it would be a word that stuck with 2020, yet here we are.

We thank you for your trust and confidence during the events of 2020 and into what 2021 may hold.  We continue to focus on keeping portfolios balanced and finding financial planning strategies that might be helpful amid everything going on around us.

Our investment philosophy remains unchanged. To summarize, we believe in the power of the markets and that they are efficient, meaning prices are fair and take into account all known information. There is much empirical data supporting this view, but over the past year we’ve seen the benefits of holding this view firsthand.

March 2020 saw a 33.8% drop in the S&P 500 index1 as COVID spread and the global economy contracted. There have been pandemics in the past without a similar market impact, so it would have been difficult to have much conviction early on that this sort of decline would happen. As the virus spread, we concede that it is plausible that investors could have seen March’s drop coming and got out beforehand. What happened over the following 9-10 months is certainly beyond what most people would have predicted.   

A rally began in April and stocks reached their previous highs by August2. The year finished in record territory, which put the S&P 500’s return for the year at 18.4%2. As you are well aware, this performance didn’t happen because everything in the world was great. (For more on this, check out When Stocks and the Economy Diverge.) Frankly, there were many data points and news headlines in which we thought the market would react one way and the exact opposite is what actually happened. This is why we are convinced that the best use of our time is keeping your portfolios balanced and working on financial planning strategies. Both of these can help with making financial decisions related to things you can control (unlike the stock market) that are likely to put you in a better position in the future. We thank you for allowing us to come beside you in this way and we look forward to another year of partnership, whether unprecedented or not!

1S&P data © 2021 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Indices are not available for direct investment.

2Market Review 2020: Looking back on an Unprecedented Year, Dimensional Fund Advisors, January 6, 2021

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. 

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.