Despite the ongoing pandemic, a stock market collapse of 35% last February/March that erased three years of gains in a matter of weeks, and continued high unemployment, US stock markets closed higher for 2020: the Dow up 7%, the widely watched S&P 500 barometer up 16% — both record highs — and the tech-heavy Nasdaq, up 43%.

The toll on human life and the negative economic impact is plainly evident with over 419,000 dead and climbing daily, nearly 11 million Americans still out of work — the current unemployment rate of 6.7% is nearly twice the 3.5% of less than a year ago — and the failure of over 4 million small businesses, a major driver of jobs accounting for 47-48% of total employment.

Immediate and dramatic action by the Fed back in mid-March – cutting rates and supporting various securities markets in unprecedented fashion – combined with repeated assurances by Chairman Powell of the Fed’s commitment to keeping rates ultra-low and to “do what it takes”to keep growth going, unemployment low and inflation in check, have provided key support for both the economy and the stock market.

Major fiscal stimulus from Congress in the way of direct payments to businesses and individuals started last March with another dab in late December, diminishing the long-term structural damage than can happen when jobs disappear and workers are out of work for too long, keeping money to spend in their pockets.

Housing, auto and retail sales have been strong, while leisure, entertainment and travel businesses remain hobbled. But with more fiscal stimulus coming – President Biden is proposing a $2T fiscal stimulus package to a Congress his party now controls – and the ongoing rollout of the Covid vaccine, the stock market is anticipating a major economic rebound in the second half of this year, when both GDP and corporate earnings – the main drivers of stock
prices – are expected to rebound in a meaningful way.

The stock market has run fast and far, and a pullback here would not be unexpected. There may also be an inflation fright at some point given the amount of liquidity in the system, but the forces that kept inflation at bay pre-Covid are still in force: global supply chain efficiencies and technological innovation and disintermediation. Bonds will likely underperform though as interest rates back up a bit.

The fundamental underpinnings to the market remain intact and should prevail, which is why we at BD8 Capital Partners remain fully invested, as we did last year, to good effect.

At BD8 Capital Partners, we continue to look for and invest in companies with long runways of growth, sustainable competitive advantages, strong balance sheets and seasoned management teams. We have used the market dislocations of the last year to buy premier names at prices well below where they are now.

If you would like to discuss your financial planning needs, the health of your portfolios and whether you are well positioned for what lies ahead, please feel free to contact us.

We hope you are healthy and safe.

Warmest regards,
Barbara

Barbara Doran
CEO CIO
bdoran@bd8cap.com
linkedin.com/in/barbara-doran-7aa248
https://twitter.com/barbara_doran1__
BD8 Capital Partners LLC
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Office: 646-885-5682
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Fax: 917-580-6882

Nolen Howe (Client Service Associate)
nhowe@bd8cap.com
Office: 332-220-3922

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