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Q4 2020 Market Recap

by
Zacc Call

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Q4 2020 Market Recap

For the last decade, the market has lived near all-time highs. We have assessed the distance from the all-time high for all 2,522 trading days in the last decade. In 50% of trading days, the S&P 500 closed within 1.65% of the all-time high. If you count days within 5% of the all-time high, you encompass 77% of trading days.


Here are three client stories. All three are waiting for an opportunity to be further away from the all-time high. We have a price alert set for each that has not triggered:

  1. In March 2017, the client said he wanted to get more aggressive if the S&P 500 dropped below 2,100. I set an alert; however, the S&P 500 never went down that far. The S&P 500 is Currently 3,768.
  2. In April 2020, Client said she wanted to get more aggressive if the S&P 500 dropped below 2,256.
  3. In November 2020, Client said he would be more aggressive if the S&P 500 falls below 3,025. This recent investor may get the chance, or he may be like #1 and the market may run away from him.


The goal is not to encourage investors to be aggressive. We expect corrections (a 10% decline) to happen nearly every year. These corrections don’t always provide the opportunity we wish. The goal is to help us make sense of the market feeling too expensive. We have witnessed investors miss a 30%increase in the stock market while waiting for a 10% pullback. The same investor often celebrates that 10%pullback as a buying opportunity despite the market being 20% higher than the original starting point. It is the difficult task of the modern-day investor to grapple with expensive investment valuations for extended periods of time. However, the best solutions are quality business selection, some diversification, cost-efficient investment structures, and reducing emotions.

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