4 Lessons from 2020Posted on — Leave a comment
Looking back on 2020 – it was an unprecedented year in so many ways. Yet, in other ways, we saw recurring themes that we’ve seen throughout history.
- Black Swan Events Can Happen Anytime
Rewind 12 month ago – back to early 2020 – the economy was strong and the stock market was climbing. Sure we’d heard about this virus in China – but we had no idea what kind of health, economic and financial carnage lay ahead.
Last year reminds us all that unexpected financial shocks can emerge at any time – without warning.
So-called Black Swan events “are characterized by their extreme rarity, severe impact, and the widespread insistence they were obvious in hindsight,” according to Investopedia.
Indeed – all those ring true for the Covid-19 crisis. Many state that world health officials have been bracing for a global pandemic for years. And, one hit last year – devastating our economy and markets for several quarters.
Did you see it coming? Most did not.
- Markets Continue to Break Records
Records are meant to be broken. In 2020, we saw gold climb to a historic, new all-time record high at $2,060 an ounce in August. While gold pulled back in a consolidation phase recently – as “risk on” attitudes drive stocks higher – the long-term uptrend in gold remains intact. Many Wall Street firms see potential for another record-breaking gold to unfold again this year. And, last year’s unprecedented actions by the Federal Reserve lay the seeds for a future inflationary crisis that could well be a major positive catalyst for gold prices in the years ahead.
- Don’t Fight the Fed
The old market adage, “don’t fight the Fed” worked. Despite massive unemployment and a huge reduction on GDP in several quarters last year – the stock market recovered from a bear market and hit new all-time record highs. Why? Don’t fight the Fed. The Federal Reserve unleashed its largest liquidity campaign in history – printing trillions of new dollars for quantitative easing and emergency spending measures. While the stock market may be one big asset bubble – hugely overvalued and at lofty heights – the Federal Reserve money printing successfully fueled a big risk rally – in a major economic disconnect between Wall Street and Main Street.
- The American Spirit Is Strong
Despite many health, political and economic challenges last year – the American spirit remains strong. The power of modern science delivered a COVID vaccine in record time – and while many challenges still lie ahead – those who bet on America are usually right.
Courage. Perseverance. Optimism. Rugged individualism. Compassion. Innovation.
Throughout history, Americans have dug deep, persevered and succeeded due to the strong American spirit in each one of us and our nation overall.
As we move into a new era – our American spirit will serve us well.
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