By: Matt Garrott

The S&P 500 dropped 9.5% on March 12th, 2020.  It fell 12% on March 16th, 2020.  It didn’t hit bottom for another week.  Today, the market is hitting all-time highs.  Even if you had the exact worst timing and invested in the S&P 500 at the pre-pandemic peak last February, you still would be sitting on a 16% gain today.  If you stuck with your financial plan, you’re probably in a good position.  Investors who did too much doom-scrolling through social media and panicked would have found it difficult to keep pace with the recovery.

The S&P 500 is up over 56% for the last 12 months with a 78% gain since the bottom.  The timing of the bottom means abnormal one-year returns across almost all asset classes and economic metrics.  This has spawned cherry-picked data sets and charts that will haunt investors over the next few years.

It has been a bumpy and uneven trip through the last twelve months, but America was up to the challenge.  The expert class scoffed at the idea of finding a vaccine within a year, let alone distributing it in any significant amount.  Today, about 3 million Americans receive a vaccine dose every day.  72% of Americans over 65 years old have received at least their first dose of the vaccine.  Cases and deaths have plummeted.

From a market perspective, the pandemic is more like a natural disaster, not a systemic problem in the economy. As a result, there’s generally been recognition that one day soon we’ll be post-pandemic.

Inflation is up over the last year.  Demand is coming back online for EVERYTHING (housing, dining, date night, sports and concert tickets) while at the same time spenders are flush with cash.  Inflation can be described as too much money chasing too few goods.  Is this a bounce back to normal or the beginning of a move higher?  Higher inflation requires significant wage growth.  Unemployment is at 6%, but some industries are nearing full employment while others are still wound down.  Bond managers that we’ve spoken with are agreed that the recent move is a case of re-flation rather than inflation.  They expect inflation to hit 2% this year, but then slide back below that after a short time.

Lessons learned:

  • Scammers shamelessly exploit tragedy and fear, striking millions with new identity theft and phishing scams
  • Printer ink is still incredibly expensive
  • Liquidity is still king
  • Seasonal colds and flu were down dramatically, but depression skyrocketed.  We are social creatures.

Fairway Scorecard 3-31-2021