The year 2020 was like no other for investors which makes it almost impossible to compare to other Black Swan events.
A good start to the year, followed by a collapse in shares prices between mid-February and mid-March. The dive erased 20% from the value of global equities. A rebound that carried all North American exchanges to higher yearend closings. More irrational exuberance in the New Year.
Rock bottom interest rates and hopes for a mass vaccine inoculation are two reasons for the giddiness. There’s no question that bonds and bond-like investments make less and less sense when compared to dividend paying stocks.
Yet, how optimistic should we be on that second count? The vaccination rollout in Canada is stumbling along in fits and starts. The World Health Organization said this week no herd immunity by the end of 2021.
So what to make of it all?
In a year end note to clients, Tom Bradley Chairman and Chief Investment Officer (CIO) of Vancouver’s Steadyhand Investments, offers some thoughts. He concludes:
- Stock markets overreact.
- When the consensus is extremely bearish, it’s a less risky time to invest.
- Interest rates have a huge impact on how bonds and stocks are valued.
- A good investment plan should anticipate periods of weakness.
- You need to lean on your plan the most when you trust it the least.
–Tom Bradley, Steadyhand Investments
The last point is a good one. 2021 will be the year of investing cautiously.