2020 was a momentous year. It was dominated by a new kind of war: a war against an invisible enemy that fought most acutely against the sick and the elderly. It caused fear, unemployment and temporary shortages. It was a war that tested the American people and the American economy.
The good news is that we are winning; the American economy stood the test and survived. The government’s initial reaction to the COVID-19 virus was to close schools and businesses and ask people to stay home to “flatten the curve” so that hospitals would not be overwhelmed. The economy slowed dramatically, and the stock market dropped by 30%.
Reacting to widespread economic distress, the Federal government passed the CARES Act, injecting several trillion dollars into the economy to protect jobs and put money into the pockets of workers and small businesses. People used technology to work and learn from home.
On the medical front, the government created “Operation Warp Speed,” a public-private partnership to develop vaccines and therapeutics to combat the virus in record time.
As we learned more about the virus, businesses began re-opening and people began very slowly returning to more normal lives. The economy achieved a record 33% annualized growth rate in the 3rd quarter, giving the U.S. a V-shaped economic recovery. The stock market also soared, reaching record highs despite continued lockdowns in several important states.
We referred to this as a war because it resembled the year following the surprise attack on Pearl Harbor. Despite a string of defeats, the American people went on to win a decisive victory and the American economy rallied. The attack of COVID-19 has been a test of the American people and the free market system. We have survived the test and are confident of a looming victory over this enemy.
As we write this, the Presidential election is still undecided. In Congressional elections, Republicans picked up some seats but the House of Representatives will remain in Democrat hands. Democrats have picked some Senate seats, but Republicans will hold a majority. This means that no matter who is President, the odds are strong against any radical changes in domestic policy. The American people have voted for stability. Free enterprise, entrepreneurship and great American companies will continue to thrive. There is a lesson hidden in all of this for investors: don’t let your politics influence your investment decisions.
As we close out the year and approach the Holiday season, we count our blessings. For those who are looking for some guidance as we approach 2021, we invite you to call, email or drop by. We look forward to meeting you.
Arie J. Korving, a CERTIFIED FINANCIAL PLANNER™ professional, has been delivering customized wealth management solutions to his clients for more than three decades. Prior to co-founding Korving & Company, he was First Vice President with UBS Wealth Management and held management positions with General Electric.