We hope that you have had a very Merry Christmas and holiday season and are looking forward to a Happy New Year. The year 2020 has been strange in so many ways … some awful and some great. We are all hoping for good health and prosperity in 2021.
The past several weeks have been very strong for the stocks in our portfolios, although we had some sharp pullbacks on Wednesday and Thursday before Christmas. The numbers are still amazing as we enter the last week of the year. As far as the markets go, I don’t see much changing as we end an incredibly great year for our client portfolios. Based on many client performance reports, most of our clients have experienced very high double digit returns in 2020. I keep finding lots of good stocks with attractive risk /reward ratios, and our current portfolio positions are continuing to perform well. Even if I don’t have a lot of room to keep adding new positions to the portfolio here at year-end, I am happy with those that we do hold — and with keeping a little in cash at this time.
Part of the reason we had such a great year for our clients is that we entered 2020 with some excellent double-digit returns from 2019 and began to sell certain holdings to capture and realize some of those gains in anticipation of the expected normal profit-taking in February. Typically, February holds the title for being the worst month of the year, especially after a great last quarter in the previous year. Little did we know that Covid-19 was going to make March such a bear of a market. But taking those profits early and raising cash in the beginning of March helped a lot. On top of that, since we did not generally hold those sectors that were hit the hardest, such as energy, banking, retail, travel, leisure, and real estate that experienced very high drops of more than half their value, we fared much better in the correction than the equity markets in general. Then the sectors that had been performing well, in which we still held the majority of our client assets, began to recover rapidly. We quickly re-invested the cash into the most favored asset classes of the equity markets at the end of March when we could finally see that demand was returning. That was the key. The markets corrected a bit, again typically, in September and October, and then continued to move up. We remained invested and participated well.
Just like last year, this January I will begin capturing some of the great gains we have experienced in 2020 and raising some cash to invest in new positions. I want to detail here changes we are seeing that will necessitate some portfolio moves. Domestic equities continue to hold the number one spot, with International Equites in the number two spot — most notably in the Asia Pacific developed and emerging markets. Within the Domestic Equities, large cap growth continues to be a great place to be invested, but small cap stocks and mid cap growth stocks have moved in strength to assume the top two spots. Therefore, it is time to allocate dollars to these areas in accounts that we manage at Fidelity as well as in your company retirement plans. If you participate in your employer’s plan and have not yet received a new investment allocation recommendation from me for your plan, please contact me. Otherwise, with nearly 75 plans to review, I am working through them.
Please let us know how we can be of further assistance to you. Thanks for your continued confidence and trust in White Oak.
