Economic Insights

You certainly did not need 20/20 vision to see that 2020 was not an ordinary year. From a global pandemic, civil unrest to an election like no other, news headlines took many twists and turns throughout the year. Despite the vast amount of negative news, financial markets ultimately shrugged off the bad news.

As human beings, we consume from the day we are born until the day we pass. Personal consumption is the largest and most predictable phenomenon there is. Seven billion people spending money to acquire things they want and need always offers interesting investing opportunities. Sometimes, however, certain spending categories become more important than others.

Throughout 2020 economic dislocations ran rampant. However, one segment of the economy that we believe has fundamental strength and has remained vibrant throughout this pandemic is the U.S. housing market. Social distancing, historically low mortgage rates, robust refinancing appetite, a mass exodus from densely populated cities, and increased demand for suburban residential housing continues to enable the U.S. housing market to surge from the March lows.

Over the past decade, there has been much debate between active and passive investing. Many modern-day investors, including fixed-income investors, have shifted to the passive investing approach. Although this approach has worked well for equities, it has generally fallen behind for fixed income as active fixed income managers generally outperform their passive counterparts.

Over the past decade, there has been much debate between active and passive investing. Many modern-day investors, including fixed-income investors, have shifted to the passive investing approach. Although this approach has worked well for equities, it has generally fallen behind for fixed income as active fixed income managers generally outperform their passive counterparts.

At some distant point in the future, as memories of a tumultuous 2020 fade, stock market returns for the year will live on as data points in a long string of annual return data stretching back hundreds of years.

This weeks blog is a continuation from last weeks theme of a return to social gathering and normal consumption spending as we head into 2021. Mean reversions are one of the best opportunities in the investment business.

When one plots the full business cycle on a chart it looks a lot like a mountain range or a roller coaster. There are peaks and valleys and period of “goldilocks” in between. Unfortunately, as investors we have to take the boom and bust cycles together.