Market Update January 2021

Hello and Happy New Year!

As we put together this Market Update, we took a look back at some of our past writing to find a bit of inspiration, particularly after the year all of us have just experienced. I mean, wow. Our crystal ball did not see 2020 coming. One note that caught our eye was from our Market Update for November 2019. We quoted a tweet that talked about how boring is good, that boring works and that boring creates exciting wealth.

Well, this year was anything but boring – at least in the world of investing. While we may all be tired of being bored (I mean, how many Groundhog Day’s can we all have?), let’s discuss the joys of a ‘boring’ approach to investing.

This year, boring worked.

Diversification worked.

Steady hands worked.

All this while, as we have said before, the investment markets since March have seemed to be utterly divorced from the economic reality of pandemic lockdowns.

The reality is governments around the world and their central banks have been putting money into the hands of those that have lost work, businesses that have lost customers and many others. Every month there seems to be another announcement of money being pushed to those that have suffered. This action has resulted in a swift recovery in stocks, bonds, real estate and other investments.

The day we write this, US President-Elect Biden has announced a $1.5 trillion stimulus spending plan. This will likely be followed by a multi-trillion dollar infrastructure spending bill this year or next. Our country will be spending about $100 billion to help launch the economy out of the pandemic.

We expect this to continue as a major theme for investing in the coming years. To break up some of the boredom, we encourage all of our clients to read The Deficit Myth, a book by Stephanie Kelton that discusses Modern Monetary Theory. This theory will provide some politicians and governments cover to create and spend more money. We don’t have an opinion as to whether this is a right or wrong approach. We believe that it will be the prevailing economic wisdom for the foreseeable future and are positioning investments to take advantage. The money created will continue to support all investments, even though they may seem overvalued.

We will take advantage of this by doing what we have always done – focus on the preservation of capital through diversification, income from investments and a reasonable rate of growth.

All of the best to you and yours. Keep safe and well.
SilverBirch Wealth Management.