By Guest Blogger Ryan Lewenza
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It’s that time of year again when we reflect back on the year and assess our personal and financial hits and misses. This year will clearly be different from others given the pandemic that has engulfed our lives and caused much pain, stress and hardship to so many people. Despite this, and that everyone wants to close the books on this fire dumpster of a year, we should still take the time for some self-reflection, which could position us for a much better 2021.
In today’s blog post I’m going ‘reflect’ by reviewing some of my key calls and recommendations made in these missives to see how I did, what I missed, and what I can improve on as an investor for the upcoming year. This is a ritual that I’ve done for a number of years in an aim to be better at my job as a financial advisor and portfolio manager.
In my outlook blog post dated January 3rd, I incorrectly predicted that the US/global economy would strengthen in 2020 and saw “low odds of a recession”. Obviously the pandemic blew up this thesis with the US/global economy experiencing the worst recession in modern history.
I also predicted that stronger corporate profits would propel stocks higher this year with the Canadian, US and emerging markets (EM) performing the best. I got the earnings call wrong but got the stock market direction correct with the TSX, S&P 500 and emerging markets returning 5.9%, 17.3%, and 16.9%, respectively, including dividends. I‘m particularly pleased with my call for the S&P 500 and EM equities to outperform this year.
Next up were my March blog posts where I predicted that the equity markets would recover from the big sell-off and would prove to be a buying opportunity. From my post “Anatomy of a bear market” dated March 16th:
- “Are we 50%, 75% or more through this bear market? Time will tell but I do believe we have already endured a good chunk of this bear market and I believe strongly that we will get through this and we’ll look back at this time as a buying opportunity.”
- This proved prescient as the equity markets bottomed on March 24th and have been on a one-way ride to the upside ever since. While many other investors and pundits were letting their emotions get the best of them and recommending going to cash, we stuck with our disciplined investment approach by riding out the storm and even tried to take advantage of the decline by rebalancing client accounts and adding to equities around this pivotal market bottom.
In my April 24th blog post “REITS are on sale”, I highlighted how attractive REITs had become after the big sell-off. I highlighted the attractive yields and valuations from the sector in the post. Specifically, I wrote:
- “Life is highly uncertain right now, which can help obscure the long-term value of assets. But I believe there is value surfacing in the REIT sector. Timing this stuff can always be difficult in the short-term, but longer term, value usually delivers good returns for patient investors. Until then, clip those great dividend yields.”
- Since that blog post, REITs have risen over 12% with much more upside potential in 2021.
As we progressed into the summer I provided a market update in my blog post “Second half”, dated July 3rd. I made a short-term prediction for the equity markets to consolidate through the summer months but then rally into year-end. I was pretty spot-on with this forecast with equity markets consolidating in the summer/fall period and then rallying strongly in November and December. From the post:
- “First, I believe the equity markets could consolidate through the summer months and trade in a range. For example, I see the S&P 500 potentially trading in a broad range of 2,700 to 3,300 through the summer months. Of course I’ll take the gains if the markets giveth, but I think it would be healthy for the equity markets to consolidate their recent strong gains over the historically weaker summer months. This would allow the markets to rebuild “internal energy” and set us up for a nice year-end rally.”
And finally, from my October and November blogposts I predicted that Biden would win the US election, leading Trump to contest the election and potentially trigger a short-term sell-off similar to that seen during the Bush/Gore 2000 contested election.
Following this expected short-term weakness markets would then rally into year-end given the strong seasonal period for equities from November to May. I got the election call correct (this time, I failed miserably in the 2016 election) and that the stock market would rally into year-end, but was off the mark on the short-term weakness call following the election results. Good enough for government work as the saying goes!
As I look back on this very challenging year I’m quite pleased with the results overall, both in terms of the recommendations I made on this blog and the solid performance results we delivered for our clients. In assessing my results my biggest miscalculation was the severity of the virus and the economic toll it would have on the global economy.
Initially, I believed the outbreak in China would resemble more of the 2003 SARS outbreak than the devastating 1918 Spanish flu pandemic. Hopefully I won’t have to go through another of these terrible pandemics in my lifetime, but if it does happen, the lesson learned from this experience will be to be more circumspect and deferential to the potential impacts of these viral infectious diseases. But despite this, I’m proud of how we preformed this year and help navigate our clients through this difficult and historic time.
Summary of Key Calls and Recommendations
Source: Turner Investments
Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.