A year full of worries, and great returns for stock investors
Last June we sent out an email entitled: “No More Lockdowns” (attached). Six months later it’s obvious that our prediction was wrong. In spite of that Dock Street clients enjoyed one of the best years in decades.
Here’s the lesson we take from this: Being right about the investments we own is more important than getting the big picture right. The companies we owned this year were perfectly positioned for the government driven lockdowns of 2020, but preparing for a pandemic was the last thing on our minds when we bought these stocks years ago.
2020 proved that the stock market is only loosely tied to politics and the economy, the two subjects that dominate the daily news flow. Investors who followed that worrisome flow and sold at any time during the year missed an 18% gain in the S&P 500—double the average year.
Of course the pandemic and the resulting lockdowns were far from the only issue that could worry investors in 2020. The George Floyd inspired demonstrations resulted in the most violent summer since the 1960’s, while the election appeared so momentous that many investors sold fearing the outcome. (Questions about the election dominated clients’ calls this autumn)
While there was plenty to worry about in 2020, our research into the individual companies in our portfolios revealed little worry about in the long run. That’s why we could be so spectacularly wrong in June about the biggest economic story of the year, while producing very favorable investment results.
Here’s an idea we like from Charlie Bilello, a smart guy we follow on Twitter: “The Media’s job is to entertain, your job is to ignore them.”
Daniel A. Ogden