Investments

2020 Market Wrap-Up & 2021 Outlook

By Dean Barber

December 10, 2020

2020 Market Wrap-Up & 2021 Outlook

If you fell asleep on January 1, 2020, and woke up today, you would see a stock market that’s on fire. The NASDAQ is up over 40%, the Russell 2000 and S&P 500 are up in the mid-teens, and the Dow Jones Industrial Average is up nearly 10%. But guess what, it hasn’t been a straight line. What does 2021 have in store for us? Join Dean Barber and Bud Kasper as they review 2020 markets and look forward to 2021.

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2020 Market Wrap-Up & 2021 Outlook

Dean Barber: Thanks so much for joining us on America’s Wealth Management Show. I’m your host Dean Barber. And the original CFP®, Bud Kasper. I’m going to do that to you from now on.

Bud Kasper: All these years, and now you’re coming up with a pet name.

Dean Barber: When did you become a CERTIFIED FINANCIAL PLANNER™, Bud?

Bud Kasper: 1992, I think it was, somewhere around in there.

Dean Barber: 28 years ago?

Bud Kasper: Yeah, that sounds right.

Dean Barber: Wow. And still, 40. That’s amazing.

Bud Kasper: Yeah. That’s my waistline.

Dean Barber: Don’t tell.

Bud Kasper: No, no.

Dean Barber: These expensive suits you wear do a good job of hiding it.

Bud Kasper: I know. Well, spandex works.

Dean Barber: Yeah, there you go. That’s supposed to be for the ladies. I’m not sure if you got the memo or not.

Bud Kasper: It’s pretty comfortable.

2020 Was Wild, Looking Forward to 2021

Dean Barber: Well, this has been an interesting year. So here we are in mid-December 2020. And as we talked last week, so many people look at 2020, and they’re like, please get it over with, let me move on. Let’s get to 2021, get something better, forget about all of the political strife, forget about COVID-19, and get back to life. Where I can say, “Hey, it’s Friday night, honey. You want to go out to dinner?” 

And we can choose our restaurant. We can make a reservation, and we can wait in line and have a cocktail at the bar. We don’t have to worry about wearing masks and social distancing and all of the things that are happening today, Bud. There are so many people which that has consumed them this year.

Post-Pandemic Economic Boom?

Bud Kasper: Yeah. It’s going to be an economic boom, I believe. And I say that only from the perspective that you’re right, you go out, there’s nobody out. And this pandemic has gotten more severe as the months have gone by. Look at the number of deaths that have come from that.

Presidential Election Cycles

But if I had to give just two reasons as to why I think the market’s going to do well next year; first off, let’s go back for presidential cycles. We’ve had this conversation before. But if you have a Democrat in the White House and have a split Congress, I don’t care which one controls what; you’ve probably got the best scenario you can have in terms of markets. Republicans are right there. If you have a Republican in the White House and a split Congress-

Dean Barber: It’s pretty close.

Stimulus

Bud Kasper: Pretty close. I bet there’s not a half a percent difference in what the outcome has been on average, historically speaking. But as we look at those two comparisons, and now we say, “What’s going to change things in 2021” the answer is the stimulus plan, which needs to happen because there’s plenty of people in pain out there that need some financial assistance.

Dean Barber: It needs to be more targeted, though, right now.

Bud Kasper: It does. You hear these stories, and I hope they’re not true, where $25 million out of the CARES Act went to a law firm. Those kinds of things, you wonder about the swamp. Everybody’s talking about this situation.

Everyone is Impacted Differently in 2020

Dean Barber: So, I’ve got a few clients that are attorneys. I talked to one of them last week. He said it’s a record year for him. Now, his firm overall, not necessarily a record year. Another attorney that I talked to, their firm is struggling because they make a lot of their money in litigation. So, because of COVID, the number of cases going to litigation in front of a judge and a full courtroom has been really slow. And so, they’ve struggled. They’ve had to lay off employees.

Bud Kasper: Yeah. Look at the litigation, though, and you have to ask yourself the question, where’s the money going to come for the award associated with it? These companies are struggling. If that weren’t the case, they would’ve been fully employed rather than having to lay people off.

2020 Markets in Review

Dean Barber: I totally agree, but here’s what I think we want to focus on because what we want to talk about today is a review of 2020 in the markets. And then, we want to address an outlook for 2021 and what people should be doing to prepare for the end of COVID or a successful vaccine and a slow, steady reopening of the US economy.

2020 Markets by the Numbers

So, I want to start Bud by doing this. Let’s imagine for just a minute that we fell asleep on January 1st, and we woke up mid-December 2020, and we look at the financial markets, and we’re just going to look at a point to point. We have 11 and a half months. The NASDAQ is higher by 45%, the S&P 500 is higher by 16.5%, and the Russell 2000 small cap index up by 16.45%. We see a Dow Jones Industrial Average up by 8.11%. Now you look at that; if you fell asleep January 1st and you woke up mid-December, you would say, “You know what? What a year?” I mean, it’s incredible.

Bud Kasper: Yeah, hard to believe that the S&P 500 was down 30.75% just back on March 30th; I think it was?

Dean Barber: Right. And that was a peak to trough.

Bud Kasper: It was. I think it’s a 36% drop from its peak.

Dean Barber: Now the Russell 2000 actually lost 30.65% in the full first quarter. So what that means is the gains that it had made in January and February, because January and February were decent months. Then March took almost everything away and then some, so we had some indices down well over 30% from the peak to trough.

Bud Kasper: Exactly right. Yeah.

Second Shortest Bear Market

Dean Barber: So, a lot of people say, “Hey, this is one of the shortest bear markets in history.” I think it followed only the Black Monday, October 19th, 1987, as the fastest bear market in history.

Bud Kasper: Yeah, and that’s when you started in the business.

Dean Barber: That was my first day, yeah.

Bud Kasper: Unbelievable. I want to get to the point, though, that 70% of our economy is based upon consumption. Well, people are so pent up. They’re so ready to spend money, they’re so prepared to go out, and that’s going to have an impact on our economy.

Dean Barber: Well, it’s interesting that you use that 70% number, Bud, because 70% of economists polled by CNBC justice last week expect returns to be somewhere between eight and 22% next year in the market.

Look, here’s the thing. We want to encourage you to be prepared. Get ready to face 2021, do it with logic, reason, and do it with some science behind it. Get a complimentary consultation from a CERTIFIED FINANCIAL PLANNER™, and let us show you what you need to be doing to make 2021 the best year possible. Click here to get that complimentary consultation. We’ll get you scheduled. We can have a conversation through virtual means, by telephone, or in-person.

2020 Was Up and Down

Dean Barber: Good times and bad times, and a little bit of both of those this year, Bud, we’ve had all kinds of records set in the stock market and a lot of other things that maybe we don’t want to repeat.

Record November for Small Cap Stocks

So look, we’ve had COVID, we’ve had riots in the street, we’ve had protests, we’ve had bear markets, we’ve had extreme bull markets, we’ve had … in November alone, Bud, we had the markets set outstanding records. Small caps, the best month ever, international stocks, best month ever. 

Back in October, Emotions Were High

If you go back to October, people were saying, “Ooh, be careful. Watch out, we’ve got an election coming up here and depending upon who wins this election man, oh this could go either way,” and I think we’re just about topped out. I mean, look, let’s face it, so many people this year made drastic emotional investing decisions. And Bud, what happens when you allow emotion to take over your investment decision-making process?

Bud Kasper: Well, the results can be devastating.

Dean Barber: You’re right. Sometimes you can get lucky, but you can’t invest based on emotion.

Bud Kasper: Sure. Yeah, and I think the luck comes in if you happen to have some cash on the sidelines and you came down and said, well, common sense tells me the market is down 30.5 %, I ought to put some money to work inside of this, and you would’ve been greatly rewarded from that. Because from peak to trough, you’re looking at almost a 50% gain from the bottom we hit in March.

2020 Market Timeline

Record Low Unemployment, Strong Economy

Dean Barber: Well, let’s do this here, okay. So the markets in Q1 2020, remember we started January with record low unemployment. We had good wage increases. The economy was humming; people were happy.

Bud Kasper: Perfect, yeah.

Dean Barber: Things were going exceptionally well.

Bud Kasper: Absolutely.

Virus News

Dean Barber: Come February, and this little thing called Coronavirus slipped into the vernacular, then later it became COVID-19.

Bud Kasper: Almost a week later.

Dean Barber: And here comes March, oh my gosh, not spring, that looked like a dead winter, you know?

Bud Kasper: Yeah.

Market Reaction to COVID-19

Dean Barber: And so we had the major indices, the Dow Jones Industrial Average losing 22.61% in the full first quarter, we had the S&P 500 losing 19.43% in the first quarter, the NASDAQ losing 10.26% in the first quarter, and we had the Russell 2000 losing 30.65% in just the first quarter. Now we fast forward and say, well, what happened from April 1st up to now? Well, the Russell 2000 is higher by 67%, since that date, the best performer. Then, number two right behind that, the NASDAQ up 61%, S&P 500 up 42, and the Dow Jones Industrial Average up 37% since that time.

Bud Kasper: Yeah, pretty incredible.

Dean Barber: But then, Bud, if you’d have said April 1st was the day to make your investment, how many people would have listened?

Bud Kasper: You mean on April fool’s day that’s pretty-

Rebalancing Your Portfolio

Dean Barber: Yeah. Okay, but I want to remind people of something we talked about right here on America’s Wealth Management Show in April. We said, “Look, if you started the year with a 60/40 portfolio, even call it a 50/50 portfolio. We believe in rebalancing,  balancing out the positions and the holdings that you have. If you didn’t actively rebalance on April 1st, you probably made a mistake.”

So if you had a 50/50 portfolio and your bonds made a little bit of money, and your stocks lost on average, call it 20%. Well, guess what it’s time to do? It’s time to sell some of the bonds and buy some stocks. If you did that, it made the equity portion of your portfolio look just that much better if you made that one small move.

Bud Kasper: Absolutely. Because if you look at the March 31st date, the low, if you will, for the S&P 500, how long was it before it got back to even, and the answer is July 14th. Now that’s a pretty long time while you’re sitting there worried about what’s going on in COVID-19. People are dying from the disease, and you’re supposed to be calm in your investment strategy and say this will work out. The only good thing about that, at least it was on an upward bias to get back there. Then, from July 14th to where we are now, it’s kind of based itself, it’s been positive, but the significant gain was that spread I just gave you between March 30th and July 14th.

Investing for Your Goals

Dean Barber: So, if you think about investing and investing for a purpose, you need to know what the reason is that you’re investing. You need to understand what your money needs to do for you to accomplish your financial objectives. If you only go into an investment, processing of, “well, I just want to make as much money as possible,” then what that denotes is a lot of greed. And when greed gets in the way, once again, bad things can happen.

It can be useful for a little bit of time, but you know what? I’ve seen people get greedy before, and eventually, they hang on way too long or get scared and get out at the bottom, and then they let those emotions of fear and greed take over. But if you have a plan, and I mean a rock-solid plan, something like our Guided Retirement System™  that lays out your entire financial life in front of you, it looks at all the potential resources you have.

Aligning Your Objectives with Your Portfolio

Dean Barber: It looks at which future spending objectives are to do what in the future, and then it says, this is the magic. That is your ideal. I call it your Goldielocks portfolio. The portfolio which will give you the highest probability of living the life you want to live and accomplishing the things you want to achieve with the least amount of risk possible. 

Then you invest that way; you invest that way knowing you’ve already tested through all of the potential scenarios out there, all of the black swans, all of the unknowns, and you let the portfolio that you’ve created for that purpose for you do its job. 

But if you invest based on looking in the rearview mirror and looking at what this index did or what that index did, or you’re trying to do some fancy manipulation of your portfolio over specific periods, then you have to pay a hell of a lot more attention than if you did it on purpose.

Don’t Take Unnecessary Risks

Bud Kasper: Right, and when you come up in the front of the planning process, and realize what the return is you need for your plan to work, and ladies and gentlemen, that doesn’t mean you have to get double-digit returns. It might mean you need 6.5% or something like that. But my point is that you don’t have to take any more risks than is necessary to make your plan successful.

Dean Barber: That’s right, and so if you had that in place, and if you were doing that, you kind of coasted through the year, you wound up with decent rates of return in your portfolio, you accomplished your objectives. 

Avoid Emotional Investing

But if you’re using emotion to make those investment decisions, you may not have wound up where you wanted to be this year. Look, here’s the thing, we are steadfast in our belief that you can’t discuss investment strategy until you’ve first laid out a complete financial plan.

Bud Kasper: Exactly.

Dean Barber: We use a process called  The Guided Retirement System™. We’d love to visit with you about how it can help you make more intelligent, informed investment decisions and can help guide you through all of the chaos that will inevitably occur in the future. It’s unknown; that’s why it’s called chaos.

I encourage you to get a complimentary consultation. Consultation means that we’re going to sit down, do a virtual meeting, do a phone call, or do an in-person meeting. We’ll get to know who you are and understand what you’re trying to accomplish. 

You’ll get to understand who we are, what our philosophies are, who we help, and what it is that we can do for you. Click here to request a complimentary consultation. The word complementary means there’s no cost, and there’s no obligation. 

Bud Kasper: You know Dean, the vast majority of people who have never seen a plan or even been in the throws, if you will, of starting to understand what planning can mean to your retirement results, so this is an eye-opening experience. 

Helping People Understand Their Retirement is Our Goal

I’m telling you that the greatest gratification I’ve had in 38 years of doing this is that when we complete a plan, people understand that we’ve done something that’s been so well designed personally for them. Rather than playing the guessing game of, “How much money will I make in the market this year,” which is a horrible way to live your retirement. Then it would be best if you found out what this is about. It will be a life-changer, a life-changer once you see the experience.

What Caused the Quick 2020 Market Recovery?

Dean Barber: Bud, I agree with you, totally agree with you. Remember I said, Bud, if you woke up this week and went to bed on January 1st, you have double-digit gains across the board except for the Dow, only up about 8.5% year-to-date, Bud. But what was the cause of that?

Bud Kasper: Of what? The drop? 

Dean Barber: No, the gain. How are we where we are in a market today? Bud, we’re back down to 6.5% unemployment if we look at some statistics. That unbelievable?

Bud Kasper: Yeah, it is.

Dean Barber: With what we came through.

Bud Kasper: Yeah. And it’s almost like we’re. It certainly isn’t what the headlines sound like, does it? 

The Stock Market is More Forward-Looking than the Economy

Dean Barber: No, absolutely not. But the market pays attention to fundamentals most of the time. Now there are some times when the market throws fundamentals aside because it sees something on the horizon. People think the economy leads the market, but typically the market leads the economy because the market tends to be a more forward-looking forecasting type of mechanism. 

Dean Barber: So if we believe what the market’s telling us over the last nine months since the lows in March, it’s telling us that there’s a lot of pent-up demand out there. Many things are coming around the corner from an economic standpoint that should lead to a pretty decent and prosperous 2021.

Bud Kasper: Yes, and I totally agree. I mean, it doesn’t take brain surgery to be able to understand that once people get the okay from the vaccine, once that happens. I write on the reports that I prepare for our clients that we don’t have an end date for what’s happening with COVID-19. So I can’t tell you that this is one of the things we’ve had in the past. So I put on there, “No end date yet, but hopeful.”

Dean Barber: Right. 

Bud Kasper: And that hopefully is what we’re going to be leaning on, if you will, as we go into the new year. And I think that people are so pent up that they want to spend money, want to get out, and re-socialize. And when that happens, that is going to be an economic boom of significant proportions.

We Thrive on Human Interaction

Dean Barber: Look, most of us thrive on human interaction. Most of us want to be out and about doing things in social groups and things like that. And it’s part of what makes us feel good.

Bud Kasper: Absolutely. 

Dean Barber: Right.

Bud Kasper: We’re social people, right?

Things Make Sense in Your Working Years

Dean Barber: Yeah, so you said something before the break, Bud, about having that plan in place that gives you the clarity on what your financial life can do. So I was thinking about this during the break, and I want to lay this out there. So you’re working, let’s assume that you’re working right now. And if you’re already retired, follow along with me anyway. 

You’re working; you go to work, you do your thing, you get your paycheck. Most of you now have the paychecks direct deposited into your bank account. And you know the majority of the time before that paycheck ever hits, exactly how much it’s going to be. Whether it’s once a month, whether it’s once a week, whether it’s every two weeks, whether it’s twice a month, however, it is that your payroll works, you know how much it is.

And you also know that taxes have already been withheld, including your FICA and your Medicare tax. You’ve got your 401(k) deduction, so your saving has already been done. And so you have something called clarity, you know how much money’s coming into your account every single month for you to spend to do the things you want to do. 

Bud Kasper: Yep.

Things Get Complicated When You Retire

Dean Barber: Okay. When you retire, all of a sudden, what was once crystal clear becomes like an early morning fog in London. You can’t see it. It’s like, “What is it that I can spend? What’s okay?” You told that story in the previous segment about how your plan clarifies what’s okay and the confidence. 

What happened was, I had an interesting conversation with a client this last week. And we did a socially distanced Zoom review, and we’re going through their plan, and this couple just retired within the previous three years. And they had all kinds of travel plans and things that they wanted to do. This year, they haven’t been able to do many of the things they wanted to do.

Running What-If Scenarios

So as we went through, we did a lot of what-if scenarios. Well, they said, “Dean, what, what this COVID has taught us is that there’s going to be unexpected things that are going to face us in our retirement. So we’ve changed our mind on how we want to look at things. If COVID could come up this quickly, how quickly could an illness come up for one or the other that could prevent us from doing the things we want to do?”

Bud Kasper: Right.

Dean Barber: “So what would it look like if we were to do far more travel, say in the next five years, and would we still be able to do the same kind of travel we’d planned on after those five years? And if so, what’s the magic number? What can we spend safely on additional travel and doing some things for our kids and grandkids and taking them on special trips over the next five years, and still not jeopardize our long-term security?”

So we spent quite a bit of time going through that. And what we arrived at was $30,000 additional per year, over the next five years, that they could comfortably spend and still not jeopardize their long-term security. All right, so what did that do? Now, okay. “Let’s get online and start making our 2022 cruise plans. We can put this plan together for our kids and our grandkids. Let’s get it on their schedule now.” And it changed the dynamic of how COVID hit these people.

Bud Kasper: Sure did.

A Shift in Thought Processes

Dean Barber: It changed their entire psyche and their thought process of thinking that, “You know what? Life is short. Unexpected things are going to hit us.” That’s what our Guided Retirement System™ does for people just like you every single day, and it’s critical. I’d love to get you introduced to that. Love to have you sit down, speak with a CERTIFIED FINANCIAL PLANNER™. Understand how The Guided Retirement System™ can give you the clarity and the confidence to put you in the driver’s seat, in control of your financial future. 

Click here to schedule a complimentary consultation. Don’t put this off. There’s no need not to have clarity on where you are at financially. And even if you’re ten years out from retirement and want to know when’s that magic date will occur and how do I get myself to that point, our Guided Retirement System™ does that. And it takes you through retirement and transfers to the next generation as well.

Home Improvement Boom and 2020 Markets

Bud Kasper: Right. An interesting factor associated with what we’re having with this disease and the impact it’s having, honest, is that people aren’t spending as much money as they typically do because they’re in their homes. They’re not moving out. They’re not socializing for obvious reasons, with the disease being that way.

So what are you seeing? You look at Home Depot as an example, or Lowe’s for that matter, or ACE hardware, I don’t care. People are saying, “Hey, I can’t get out. I’m going to do some stuff to my house.” And so they keep spending, but they’re redirecting into money into other areas because they can’t get out for the socialized results that they would like to have initially. 

Dean Barber: I have a brother that’s a couple of years younger than me, and he has a job that requires an awful lot of travel. And of course, COVID has put a slowdown, dramatic slowdown, on the amount of travel. So my wife and I went and visited my brother and sister-in-law this last weekend. And we were talking about it. So I walk in, and they had redone their kitchen. They renovated their dining room, their living room and put in a home gym in their outbuilding. 

A Blessing in Disguise

So he said, “Look, this is what COVID has done for me.” He said, “Quite honestly, it’s been a blessing because I’m spending more time with my wife than I have in the last five years. And it’s been great. It’s allowed us to refocus our lives on the things we believe are the most important. We got lost in the day-to-day chaos of I’m moving so fast and I’m doing so many different things.” So I think there are some good things to be learned from this. 

Bud Kasper: And I think it’s more meaningful because look, he’s going to get the reward of those changes he made to his house for the rest of his life.

Dean Barber: Yep.

Bud Kasper: It’s different than if you take a cruise for two weeks and you enjoy yourself. That was an excellent getaway for you, but once it’s over, it’s over. In the case of your brother, he certainly has got something to enjoy.

Dean Barber: Right. So whether it is doing some remodeling to your home now, whether it’s a vacation home or something else you want to do, get the clarity you want. Click here to get that complimentary consultation with us. 

Last 5-6 Weeks Included Some Big Announcements

So, Bud, we’ve had some big announcements in the last, let’s call it five to six weeks, some big things happening on the medical front in the fight against COVID-19. Vaccines are coming out and distributing in Europe. They’re starting to be distributed here in the United States. A brother that’s a CEO of a hospital saying, “They’re getting their first 2000 doses.” He explained how they’re going to distribute those and what their plan is, and it’s happening. It’s happening as we speak, and it’s going to change the dynamic of next year. 

The Anonymous Economists’ Predictions

So, when we read the article this last week, which was put together by CNBC, they did a poll of many different economists. And, the economist all remained anonymous in this poll, which I found interesting.

Bud Kasper: Agreed.

Dean Barber: Usually, they want to say, “Here’s who I represent, and this is the bank or the brokerage firm, or whatever it is that I represent.”

But, the interesting thing is that 70% of the economist poll said, “They were cautiously optimistic about the market performance for 2021.” And, the projected returns for the market in 2021 ranged between eight and 22%.

Bud Kasper: Okay.

Dean Barber: So, 70% of the economists think, “Yeah, the market should perform an eight to 22% range next year.” So you might ask yourself the question, and I’ve heard some people think, “Well, markets are at all-time highs.” I mean, we get records set because markets are at all-time highs, Bud. Does that mean anything to you?

Bud Kasper: No, not really. It depends on what the underlying companies are doing.

Dean Barber: Right.

Industries that Got Impacted the Most

Bud Kasper: Right. I mean, if you look at what industries got killed, oil got trashed, airlines got trashed-

Dean Barber: Cruise lines.

Bud Kasper: Cruise lines, all these.

Dean Barber: Casino stocks.

Bud Kasper: And the question is, “Oh well, they’ll never come back or be where they were.” Do you want to bet? Because I’m telling you that I think they will come back, and with a vengeance. Because that’s what people want, they want to go back to what was defined as their normality, and however, they spent their money accordingly. And, that’s going to boost the economy again, in my opinion.

Energy Stocks in the 2020 Market

Dean Barber: When you look at energy stocks, and you look at the energy sector as a whole, in November, the energy sector was higher by 28% in a month. Yet, if you look at most of the major oil stocks, they’re down on the year, somewhere between 35 and 50% at this point, right. So, that’s after that big 28% run-up.

Bud Kasper: Right.

Dean Barber: What does that tell you? Are we coming back? Are the oil stocks going to get back to where they were? Will planes going to begin to fly, cruise ships begin to sail? Will these things happen? Are people going to get out and about and burn the fuel that they did before? Or are we going to get a Green New Deal that will “eliminate fossil fuels” altogether, and you need to abandon energy stocks completely?

Bud Kasper: Those are what we refer to in the business as disruptors. Suppose they do make those types of changes. And, I’m not saying it’s a bad thing or a good thing. Still, I’m just saying, “It disrupts what the economy has been doing traditionally,” so therefore, we have to make adjustments in portfolios many times to make sure that we don’t find ourselves in an arena that isn’t going to produce for it.

Electric Car Dissonance

Dean Barber: Oh, I have to chuckle here because I saw a little meme this last week, and it was a gasoline-powered minivan pulling a trailer with a diesel generator in the process of charging an electric car. It was stranded on the side of the road.

Bud Kasper: Now, that’s perfect. That is perfect.

Dean Barber: Doesn’t it beg the question, if you get stranded, and your car runs out of juice, and you’re an electric car, what’re you going to do?!

Bud Kasper: Here’s another. Let’s say that electric cars all of a sudden take over, okay. Combustion goes down, where the electric grid will get that much power to refuel these electric cars.

Dean Barber: Right.

Bud Kasper: Yeah. All of a sudden, you’re, “Hey, my toaster is not on. What’s the matter?”

Dean Barber: “Yeah. Charlie was recharging his car overnight, honey. We’re going to have to wait on the toast.”

Oh Tesla

But the point is, look, I brought up the electric cars because of Tesla’s amazing 1000 P/E ratio and it’s out of orbit stock price. Tesla’s addition to the S&P 500. And so, if you own the S&P 500 Index, all of a sudden, you’re not going to own Tesla at the highest point that it’s ever been at a multiple of 1000 times earnings. What’s that going to do to the price-earnings ratio of the S&P 500?

Bud Kasper: That is a great question. We talked briefly about it before we went on air. I think it’s so, so serious. Here we have Tesla in the S&P 500, but it’s in at a price that is so much higher than it was a year ago. The question is: At that percentage of exposure in the S&P 500 in Tesla, how much real potential is there? I mean, you got to have a multiple, that’s going to be pretty significant to see that thing go up another, whatever, 500 points or whatever the case may be. Talk about buying low or buying high.

You’ve Got Mail!

Dean Barber: Yeah. It reminds me of AOL right back in 1998, 1999.

Bud Kasper: Okay. Yeah.

Dean Barber: What’s AOL stock doing now?

Bud Kasper: I have no idea. It’s not existent.

Dean Barber: You’ve got mail!

Bud Kasper: Yeah!

Dean Barber: Where’d that go?

Bud Kasper: With the Tom Hanks movie, I think.

Avoid Emotional Investing

Dean Barber: Right. The point is this, things that have happened this year can cause emotional investing decisions. We saw it happen in the tech boom, where all the money started chasing very few stocks, and they ignored a lot of the brick and mortar and just the dividend-paying stocks and things like that. 

Let’s go back and look and think about the numbers that I gave in today’s program’s first and second segments. You can see the money flowing in the same type of direction and putting some of these newer tech companies in straight-up skyrocketing type positions. And, the money is flowing into those stocks still. And with Tesla’s addition to the S&P 500, it’s going to continue to get money, right?

Technology Outlook

Bud Kasper: Yeah, right. The issue that I’ve been presenting is with technology doing what it is, and I’m a big believer in technology, but as we’ve seen incredible returns that have come out of the NASDAQ this year and what technology represents, is it getting overpriced at this point?

Dean Barber: I don’t think so. I mean, I think if you look at the P/E ratio on the NASDAQ versus the P/E ratio on the S&P 500 or the Dow Jones Industrial Average, to that matter, they’re not that much different.

Get the Guidance You Need for 2021

Here’s the thing, that there’s no magic formula for picking where your money should be at any given point in time. However, some things can tell you what areas you should overweight in and underweight in, etc. But, that should be part of a well-designed portfolio. That is a portfolio that is designed specifically for you and for your financial goals. And that’s why I said, “Probably 20, 30 minutes ago, that we firmly believe that we can’t design a portfolio for you.”

Nobody should design a portfolio for you until they know what your money needs to do to accomplish your long-term financial objectives and your immediate financial objectives.

Comprehensive Planning is Key

The only way you get that done is through comprehensive planning. We use a program that is individualized just to us, and that is our guided retirement system. I invite you to get a complimentary consultation and experience The Guided Retirement System™. We can do meetings through virtual means, telephone calls, or in-person meetings. 

You can request and schedule your complimentary consultation right here. Well, we appreciate you spending some time with us here. Know, the chiefs are playing here in Kansas City, so get back to the game. We’ll be back with you next week. Thanks for joining us.

Schedule Complimentary Consultation

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Investment advisory services offered through Barber Financial Group, Inc., an SEC Registered Investment Adviser.

The views expressed represent the opinion of Barber Financial Group an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Barber Financial Group does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.