We have a new ornament on our tree this year: a roll of toilet paper which simply says, “2020.” What a year it has been. It actually has been a positive year in the markets, although as we have said before, those gains are not equally distributed. However, even the unloved value stocks have made a recent comeback and will at least finish the year where they started, if not a little ahead. How can that be?
Life is not really about the events or circumstances that impact us. No, life is about our reaction to those events and circumstances. Once upon a time, when children actually went to school and schools actually cared about education, we learned these lessons through classical literature. This time of year we would read “A Christmas Carol,” by Charles Dickens. Scrooge was a miserly old man, but we learned that he wasn’t always that way; the events of his life hardened him. One such event was the premature death of his sister.
His nephew Fred also experienced that same loss, but it did not affect him in the same way. He was full of love and happiness, especially during the Christmas season. His uncle treated him badly, but Fred’s response was to feel pity for his Uncle Scrooge. Two men, living in the same world and sharing many of the same events, but with two totally different reactions.
This is the story of 2020: same year, same pandemic, many different reactions. If you live in California or New York, then you have lost almost all of your freedom and ironically been ravaged by the virus anyway. On the other hand, if you live in Georgia or Alabama, your life has pretty much gone on with the exception of wearing masks and working more from home, and while the virus is here it has stayed relatively under control.
We see it as well with our friends. I have friends who sadly have lost parents to COVID-19, yet they maintain a positive outlook even while grieving their loss. I have others who have been spared, yet every word out of their mouths is gloom and doom and fear. It isn’t what happens, it is how we choose to react.
So why is the market finishing this year in positive territory? Because more people see the glass as half full than those who see it as half empty. 2020 has been hard, but life is hard. It is supposed to be hard; life tests us. Those tests make us stronger and more resilient, and help us have greater appreciation for the good times.
What will 2021 bring? I believe most of us are looking at 2021 with optimism. Although I did hear a joke recently, “Just wait until 2020 turns 21 and starts drinking.” While I admit that I laughed, I also have to admit to being firmly in the camp of optimism.
More importantly for my day job and your portfolio, I believe most market participants share that optimism. 2021 will likely be a good year for the market. The odds are that the gains next year will be heavily weighted toward the areas that were left behind this year, and that some highfliers will come back to earth. When all is said and done, it should be positive. Of course, those are just the probabilities. Ultimately, 2021 – like every year, even 2020 – will be what we decide to make of it.
As for the next few days, I know in my house, and I hope in yours, Santa is still coming. Merry Christmas and Happy New Year!
Chuck Osborne, CFA