Cascade Wealth Group
Late Year Update: November 2020
2020, what a year it’s been. To think 12 months ago the words Corona Virus and COVID 19 didn’t even exist in our vocabulary is almost impossible to wrap one’s mind around. How things have changed in just a few short months. Throw in racial and social unrest coupled with an election and you have more than enough ingredients to create turmoil around the globe. Just one of these events would typically be enough to add volatility to the markets, but combine all three and we get the ups and downs that have become almost commonplace this year.
As we have stated in previous letters, the market doesn’t like is uncertainty, which has been the single biggest contributor to volatility this year. Beginning in March and April the impact of the virus both short or long term was unknown and the markets reacted violently. As the year moved on and more data was acquired, the market began to price in what looks to be a relatively shorter-term event than a multi-year protracted impact. Now we don’t believe that the virus will “be gone by Easter” as once famously stated, but we also do feel a vaccine is likely in the coming months especially given the announcement this week from Pfizer. Looking 6-12 months out it’s hard not to see life and the economy returning to a more “normal” and pre-pandemic level. Will it reach the full levels of January 2020 in that time frame? Unlikely, but we do feel that things will continue to improve moving forward. Unemployment continues to decline, GDP numbers are improving and corporate earnings are largely ahead of expectations. It is important to take these numbers in context and understand the surprises to the upside are in large part due to surpassing numbers that were adjusted down, but either way this is positive. Things are not as bad, or put differently, better than expected.
The Two Elephants In The Room: COVID and an Election…
One: The rising COVID cases both globally and in the US. We see a few positives to this. First, the overall case fatality rate continues to remain really low. While cases continue to increase hospitalizations and deaths have largely remained unchanged. Meaning that as the cases have gone up, deaths have not correspondingly spiked. Second, as we mentioned above, we feel a vaccine is likely in the coming months. Will it be before January? Again, unlikely, but before May, we feel this is a more realistic expectation.
Two: The election. This past week has been a surprise with the market rally for many investors and while the election is still partly unknown it appears there will be a divided government. As of the writing of this update it looks as thought the Senate may have a slim majority for the GOP and the Democrats in the House and Biden winning the White House. Georgia will be at the center of the political universe for the next 2 months as we await a final outcome in their two Senate races. If Senate control does go to the GOP, it will force compromise in order to move forward legislation. The markets the past 5 days have clearly seen this as a positive and have moved up with their largest gains since April.
Overall the next 6 months should continue to provide good news and improving trends in the US and globally. A vaccine, declining COVID Cases, and election behind us are all positive contributors to both the economy and the markets. This year has been one we will probably all look forward to having behind us, but we remain optimistic about what 2021 and the future holds.
As always if you have any questions about anything above please don’t hesitate to reach out. Stay safe and healthy.
Bryan, Thane, Gary and the Cascade Team.