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Play the cards you are dealt

Play the cards you are dealt

| November 03, 2020

With two months left in the calendar year, it would be nice if we could breathe a sigh of relief knowing that all is well.  Unfortunately, these last two months seem likely to present us with as much uncertainty as the first 10 months have.  2020 has dealt the world a blow and brought out the best and the worst in our society.  We have run the gamut of feelings and experiences: inclusion and exclusion; optimism and pessimism; joy and anger; sickness and health; life and death.  But regardless of who our next president will be (we are publishing on election day), what media outlet you subscribe to, or how you celebrate the upcoming holidays, we all have to focus on the future and keep moving forward.  It reminds us of the saying, “You can’t control the cards you’re dealt, just how you play the hand.”

While you can apply the saying to many facets of life, it definitely resonates with us as we continue to actively manage our clients’ portfolios.  Recent renewed spikes in corona virus cases have European countries considering new rounds of shutdowns, causing equity markets to sell off here in the US.  It also appears that any hope of additional economic stimulus being provided to our small businesses and municipalities is now pushed off to as late as early 2021.  This realization has also put downward pressure on US equity markets.  Since mid-October we have seen volatility increase dramatically.  So, what do we do?  Where are the opportunities when thing seems so negative?  Do we simply fold the “hand”?

Actually, no.  It’s true that short term volatility has increased.  But if you apply some technical analysis to the S&P index, it still looks very positive.  Also, regardless of who is elected our next President, we believe it’s not a question of “if” but of “when” the next round of economic stimulus is passed.  The new stimulus package would be another positive for stocks.  Additionally, constructive for stocks are the statements from the Federal Reserve, the ECB and other global central bankers repeatedly reassuring markets that their policies will remain accommodative. 

Specifically considering additional stimulus and how that will over time have a positive impact on our clients’ portfolios, we have, for many clients, added positions in sectors such as Communication Services, Industrials, Materials, Utilities, and Clean Energy.  For most clients this involved exiting out of individual stock holdings.  We also added an active international manager, dropping our exposure to a passive international developed index we had previously used for most clients.  We want to be more selective with the international names we own as opposed to holding a very broad index.

We hope this additional insight helps as we play out the final few hands that 2020 is dealing us.  While we don’t know what the future holds, we continue to expect near term volatility.  We are, however, keeping an eye to the future and continue to look for opportunity.

Speaking of opportunity, we hope everyone saw the recent email invitation to our next virtual event to discuss the impact of the election on markets from the view point of Fidelity Investments, featuring Bradford Pineault, VP Capital Markets Strategist for Fidelity Investments.  The event will be Tuesday the 10th from 2:00 to 3:00 pm Eastern Standard Time.  We hope you can join us.  It should be another informative event.

If you have any questions or comments, please feel free to reach out to us.