New Year 2021 Letter

Even more so this year, in 2021, it’s hard to look ahead to the next 12 months without looking back at 2020.

2020 was an unusually challenging year that saw:

• A worldwide pandemic
• A global economic collapse
• Stay-at-home orders and lockdowns across every country
• A bear market and a surprisingly quick recovery in some sectors
• A highly controversial election

And yet, for most equity investors, 2020 ended up to be a banner year.

The only mistake was if you sold in April and bought back after a run-up or not at all as you were waiting for the other shoe to fall, which it didn’t. Thankfully, in our Equity Portfolios, we were able to take advantage of this downturn.

For many bond investors and certainly REIT investors, you had a mixed year with several fixed income sectors feeling all types of pain.

Through it all, we’ve been able to offer our clients the value of personal and professional relationships, even if we’ve had to learn to connect in new ways. There are still risks to navigate in 2021, but it’s time to look forward to renewed growth as global economic output and corporate earnings return to pre-pandemic levels.

What to Expect in 2021

What can we expect from a new Biden Administration, with or without split government?

Taxes

There is a belief that the “rich” don’t pay their fair share of income taxes. Expect multiple proposals to raise the individual rates on those earning over $100,000.

There is a belief that corporations don’t pay their fair share of taxes. Expect a proposal to raise corporate rates. It will be interesting to see how Congress acts here since the Covid-19 shutdowns have closed and will continue to close hundreds of thousands of small businesses, yet the “big box” stores were allowed to remain open and thrived.

There is a belief that we need to raise capital gains taxes because they only affect the rich. So, again, expect several proposals to raise this rate.

Regulating Big Tech

With great power comes great responsibility, and not everyone thinks Big Tech is up to the task.

There is a belief that Tech Firms have gained too much power and even abused their Section 230 Exemption. Expect proposals, but no changes as the Tech Industry is an enormous donor to Democratic Party and candidates.

Healthcare & Medicine

Expect the delivery systems for the vaccines to improve as states and localities get their acts together.

Expect a bill to legalize marijuana use, under certain conditions.

Expect pressure later this year on the drug-delivery sector and Pharmaceutical Sector. There is mounting pressure to control Rx costs, which will put downward pressure on developing new prescription drugs.

Domestic Politics

Expect proposals to bail out Democratic states and cities.

Expect nothing to happen to ensure future voting procedures are more accurate.

Expect pressure on the Energy Sector and Financial Sector. The Biden Administration will be generally unfriendly to the Oil and Gas Sectors and the large banks will experience increasing regulations.

Expect the Biden Administration will be very friendly to the Alternative Energy sector.

Expect pressure to expand the role of the Federal Government. There are more folks in Congress than ever who believe the future of the United States is a larger and greater Central Government.

Expect the Bankruptcy Courts to have their busiest year ever as small businesses file for bankruptcy in record numbers.

International Politics

Expect less pressure on China and more trade. Unfortunately, the main problem of US Corporations having to make the Chinese Government their partners and share all secrets and patents with them has not been resolved and probably won’t be.

Expect more pressure on the world, exerted by China, to stop doing  business with Taiwan.

Expect the European Union to quickly normalize relations with China thereby expanding China’s trade and influence.

Moving Forward

We will navigate these markets and the ups and downs of investing in 2021.  We see several market corrections happening this year, yet we will most probably finish stronger and higher than today.

As always, we view these market corrections to be buying opportunities and not selling free-for-alls. Our success has come from being both technical and strategic in nature—technical meaning what are we doing right now, and strategic meaning building winning portfolios for the long-term. Watch for subtle changes we make from time to time.

Please feel free to call me anytime at 925-314-8503 to discuss your portfolio.

All my best for a successful 2021! We wish you health, happiness and prosperity.

Sincerely yours,

Financial Planner, Wealth Advisor, Registered Principal