Happy New Year! - January 2021
To a person, I think we are all pleased to kick 2020 to the curb. Gosh, so much misery month after month. Yet I am constantly amazed how ebullient and resilient our culture is. American’s do adapt. I think most of us are excited about 2021 and ready to embrace much of our ‘ol normal life as the vaccine hopefully turns the tide. We are indeed an inherently positive and optimistic people. And I think we all realize how blessed we are to live in these United States.
Managing your all-important funds for those of us at Duncan-Newman Associates is a tremendous honor and an extraordinary responsibility. Many’s a sleepless night we accept as part of the job as we assess and reassess how best to invest your monies while still striving to grow your income. Of late, making certain we stay ahead of the changes caused by the varying political winds in Washington, DC is always a challenge.
As of this moment the Georgia senate election has just been called and it appears the two democratic candidates have pulled out the needed wins thus securing the senate for their team, thanks to the VP vote they’ll have with Kamala Harris. That’ll likely give the Dems the slightest edge possible in making policy for the next two years.
Within hours of the Georgia election being called, we witnessed the very sad spectacle in our nation’s capitol as law and order completely broke down. Throughout this tumultuous couple of days, the markets continued to exhibit their extraordinary resilience and optimism about the near term future; with the Dow Jones blowing right on through the 31,000 level. (A reminder that just last March, as COVID was first taking hold, the index was down to roughly 18,000.) I cannot conjure up a superlative sufficient to express how eye-popping that ten-month change truly is by any historical measurement!
Though the democrats have secured a razor-thin edge in both houses of Congress and the White House, the electorate remains equally divided. Hope springs eternal that perhaps the horrible events at the capitol will bring a lighter touch from both parties in their negotiations going forward. As I’ve said many times, Wall Street prefers Washington gridlock. And we remain pretty close to that even now. While one party can move legislation if they stay united, the odds are some compromise will have to occur in order to “do the people’s business.” I think that is what investment professionals felt as the markets pushed higher despite the apparent turmoil. So a pox on both parties if recent events don’t result in some modest change in behavior. We shall see.
So what to expect in the year ahead with your money given these circumstances?
The markets in the SHORT TERM like the $600 the Republicans grudgingly granted in late December AND they will be utterly euphoric about the Democrat’s open-checkbook of the additional $2,000, with likely more “free money” on the way for so called “infrastructure.” Wall Street lives for the near term candy rush of a stimulus package. So all this free cash will feed that habit for a little while. But like any junkie, the high will result in some amount of withdrawal in the future. As I’ve said before, there will be consequences for spending with abandon; which both parties have done when in power over the last decade. Check out this sobering site to crystalize my point: https://www.usdebtclock.org/.
One of the immediate consequences will likely be a sharp rise in taxes. It will all be couched in hackneyed phrases, like, don’t’ worry, “we’re only gonna tax the rich.” But even that popular bromide is reaching its limitations, particularly in states like California. Capital gains tax rates will almost certainly go up and that will begin to rein in the real estate market. When interest rates start to rise again, (not likely this year), that will create the end of this up cycle in property ownership.
As for equities, the stock market ultimately prefers divided government as I said. We are very close to that now. SO once the stimulus high dies back, the market will top out. Do we see an immediate crash on the near term horizon? No. The ice in the punch bowl has nearly all melted, but the party will go on a little longer, in my opinion. In my view, 2021 will be a year to continue to garner as much income as we can from our investments. Assuming the pandemic does ebb with the inoculations, people (and equity markets), will feel more positive. Opportunities will absolutely present themselves as we evaluate the new order of things.
Earlier today, Brad, Zac and I continued our ever-evolving conversations about the direction we want to take your portfolio as this year matures. We will likely suggest increasing some diversification for additional safety using several additional inflation-hedged vehicles and more diverse bond environments. You will be getting a call from us detailing what changes we envision to ‘prepare and preserve’ while continuing to derive as much cash flow as we can for you. I do not envision a terrible ’21 by any means. We simply want to take advantage of inevitable opportunities that always pop up as the world changes.
Overall, I remain quite optimistic about the year ahead. Particularly as we beat pack the pandemic and regain some control over our lives. In six or nine months, I would think we’ll all feel a heck of a lot happier about the future than we did in 2020. Let’s stay optimistic! You’ll live longer that way and frankly, you have every reason to feel good about the future. Our country is second to none at getting beyond adversity.
From Fariba, Laura, Zac, Brad and yours truly, we wish you a wonderful year ahead. We promise to do our utmost to make it as comfortable and prosperous as we possibly can. Remember, we are ALWAYS here when you need us.
Robert Duncan, CFP®
30300 Agoura Road. Suite 280
Agoura Hills, CA 91301
Bradley L. Newman
Masters in Financial Planning
Managing Director, Branch Manager
PIM Portfolio Manager
Zachary Breverman, CFP®
Executive Vice President
Senior Registered Account Administrator
Senior Registered Account Administrator
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