Market Update December 2020

Market Update Summary (December 2020):

• Our proprietary risk algorithm looks at 14 points of economic volatility. Risk levels have come down significantly and continue to do so. The economic volatility has returned to pre-pandemic rates. The markets are holding steady and there is no warnings flashing.
• We’ve had a large-cap-based market advance over the last several years. We are beginning to see mid- and small-cap positions breaking out. This is typical for January time frame in an annual cycle, but this is encouraging that recovery may be trickling down to middle and smaller companies.
• Pre-COVID we were operating at the best economy we have seen. The market is beginning to show a more distributed recovery, meaning additional health in the overall economy.
• We are right at the point of potential breakout for some international positions. Some regions are reaching new highs. We haven’t liked the look of international markets for a while, but now we are ready to begin taking on some strategic international exposure. 
• Markets can always be propelled higher – easy money and near-zero interest rates can trump everything in the economy. We are seeing this in the S&P 500 and other charts that continue to grow despite other factors like high poverty and unemployment rates.
• The technology sector looks strong and shows no sign of waning. We continue to hold positions here and take on new strategic positions. We have also added strategic positions in consumer staples and industrials to reduce risk in the portfolio.
• The cryptocurrency sector is gaining broader adoption from large companies and even mid-size companies. We liken this disruptive technology to the emergence of the Internet. We believe 98% of the cryptocurrency market does not have viability, but we are taking small positions strategically in the areas that are showing longer-term sustainability.
• We look at trends and what those indicate. One trend we are planning for is Millennials coming into a massive transfer of wealth and the changes that will come with that: cryptocurrency, socially-responsible investing, etc
• Another trend we see is the US dollar losing its position as the reserve currency. We may see this replaced by a basket of world currencies or digital currencies.
• SPACs are coming back into popularity. SPACs are a way to have exposure in private companies, often focused on disruptive technology. SPACs provide a safer way to invest in disruptive technology. We have taken strategic positions in two of these and have to plans to add any more unless we see a strong manager.
• We exited REITs (real estate holdings) a few years ago when our indicators let us know it was time. They have since performed badly. Our current small real estate positions are in the Class B space focused on the technology space, such as warehouses that house servers, etc.

As always, we continue to diligently track current market conditions and future economic outlooks so we can position our clients as strategically as possible.

We wish everyone a holiday season of peace and gratitude. See you in 2021!

To set up a meeting to discuss your portfolio, please click here or give us a call.
 

Best regards,

The Willow Team
+1 413 236 2980