With Election Day fast approaching, we want to remind our clients again that while there may be some volatile trading around the election, it’s anybody’s guess what will happen and what the market will do in the short-run.
2020 has been a year to remember and what a year it’s been. The coronavirus pandemic began in the United States shortly after the beginning of the year, causing a long bull market to end in spectacular fashion, crashing 34% in just 33 days! No one has ever seen such a drastic decline in such a short time. In the face of this substantial decline, we advised our clients to stay the course with their portfolios and that advice has been rewarded. After the brief bear market, the markets quickly began a new bull market, recovering all of the declines in a matter of several months and the markets continue to march higher.
The decline earlier this year, while upsetting, was just about average as bear markets go. That is, the S&P 500 Index has declined by about a third on average every five years or so since the end of WWII. But in those 75 years, the index has gone from about 15 to where it is now, at almost 3,300. The lesson is this: historically, the declines haven’t lasted and long-term progress has continued to emerge over time.
Through all of the market’s gyrations, the coronavirus pandemic has continued its relentless march. Policy responses have created tremendous economic and social dislocations, but markets have responded positively to the economic stimulus and our ongoing economic recovery. In the search for an effective vaccine, we’ve gained a great deal of knowledge about the disease and treatments for the virus have improved tremendously.
Using short-term economic or political commentary and market forecasting to inform your investment strategy can be a recipe for significant underperformance in the long-run. Instead, developing a long-term plan, and sticking to that plan through all the fears (and fads) of an investing lifetime, helps to avoid sudden emotional, knee-jerk decisions. Our best advice is to remain confident that long-term market results will help you to achieve your long-term goals and objectives.
Regarding the election, we face uncertain results in a hyper-partisan political environment. We know from talking to our clients that investors are worried about how the markets may react. Portfolios are designed to provide for long-term financial success and we don’t think it makes sense to make any changes because of the uncertainties surrounding the election. Aside from incurring capital gains taxes, chances of getting out and then back in advantageously are historically very poor, nor can we be helpful in attempting to do so. As we have done all year—and as we do each election year—we urge you to simply stay the course.
Thank you very much for your continued confidence in our service and advice. If you would like to discuss our opinions, outlook, or your portfolio in greater detail, we would be happy to schedule a meeting or a conference call at your convenience. Lastly, don’t keep us a secret. If you know someone who would like help planning for their financial future, we will be pleased to speak with them to see if we can assist.
Horizon Wealth Advisors is a Houston based fee-only wealth management firm. Horizon is a fiduciary advisor. We specialize in helping successful individuals and families understand, organize, and manage their often complex financial situations. Horizon offers integrated financial planning and investment management services.