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Investment Letter

4th Quarter 2020

As the calendar year advances to 2021, the world remains entrenched in the health care battle against COVID-19 and related economic uncertainties. Thankfully, there is light at the end of the tunnel. The Herculean effort by the science community delivered a vaccine to combat the health care crisis late in the quarter. Approval was fast tracked, and inoculations began immediately for frontline workers and the most vulnerable.  Mass distribution of the vaccine will most likely prove to be a formidable task in the coming months as supplies are limited and public distrust is elevated. The U.S. Presidential election cycle came to a turbulent close, and it ultimately delivered a new administration that will assume political control with the power of an undivided congress behind it.  

Without a doubt, 2020 was a stressful year for most, but several good things occurred that bear remembrance. While the markets went south during the first quarter, by year end most of the major Asset Classes recovered in fine form, with many indices posting new highs.  Many investors  were able to take advantage of the one-year suspension of the Required Minimum Distributions from retirement accounts (via the CARES Act). Federal Tax returns had a delayed filing date. Interest Rates remained very low while inflation pressures remained muzzled. Many people (including our office) adapted to a new work environment using remote access and video conferencing. The world went from “what is COVID”, to nationwide lock downs during the spring of 2020, to legitimate discussions of a Second Great Depression. Despite the hardships endured and uncertain future, the nation remained resilient during the year, and the battered economy started to recover over the summer and fall months. The restoration of some normality will be central to the favorable estimates of pent-up demand being released. It was quite the roller coaster ride during the past twelve-month period of change.

As we mentioned, the financial markets thrived during a period of tremendous headwinds in 2020. The S&P 500 Index set thirty-three new all-time closing highs during the year. Eleven occurred during the fourth quarter as domestic large and small company stocks, technology stocks, international stocks, and real estate posted double digit returns.  Overall, 2020 will go down in the record books as a surprising and profitable year for investors.    

The minutes from Federal Open Market Committee (FOMC) meeting in December verified the economy continued to recover, but at a more moderate pace than the rapid bounce back during the third quarter. 

In addition, Gross Domestic Product improved, but remained well below levels from the start of 2020; labor markets advanced; financial market sentiment benefited from the news of a forthcoming vaccine; and uncertainty decreased following the U.S. election.  Regarding monetary policy, the Fed reaffirmed its commitment to using a full range of tools to support the domestic economy. As events unfold, we expect the Fed’s accommodative policies will continue. Rates should remain low (at current levels) for the foreseeable future and the aggressive rate of asset purchases will be extended until further progress has been made in the post-virus economic recovery.

Guarded optimism is our theme for 2021.  We are hopeful a vaccine-enabled economic recovery will be the major story this year, and a rising tide of optimism will lead to improved conditions throughout the world. We expect Central Banks to remain extremely accommodative and fiscal stimulus to be plentiful. As conditions improve, we believe healthier corporate fundamentals will contribute to elevated asset prices and investor profitability.

While the change in sentiment and guarded optimism is warranted, we have several items that we are monitoring. Our list includes the following: growing wave of debt due to unprecedented fiscal stimulus, new virus variant that delays the economic recovery, political disfunction and unrest in the U.S., tax change proposals (income, capital gains, estate), change in Federal Reserve policy, unexpected inflation, and tension among our nation’s trading partners. We are keeping a watchful eye on these and other threats as they develop.

As I have often stated, our investment philosophy remains based on the fundamentals. We believe it is time---not timing---that matters most. The successful long-term investor is patient, weathers market swings, and adheres to a disciplined investment process. 

Please consider making a New Year’s resolution to revisit and update your financial plan. The start of a new year is also a good time to review your estate planning documents for an update if you had any personal circumstance changes.

Common events that could necessitate estate plan alterations: 

  • Birth or adoption of a child or grandchild
  • Death of a spouse or family member
  • Marriage, divorce, or re-marriage
  • Illness or disability
  • Child or grandchild reaching the age of majority
  • Education funding
  • Death of a guardian, executor, trustee
  • Retirement
  • Sale of a home or business interest
  • Large gift or inheritance
  • Revisions in federal or state income tax or estate tax laws

Over the last few years, I have had many conversations with clients about wealth transfer and financial education of their children and grandchildren. Many of the conversations were about the estate planning implications of insurance, changes to Individual Retirement Accounts, and gifting to the next generation. A subject that comes up far less frequently is individual planning opportunities for the next generation. Education and preparation for common topics such as: budget creation, first-time home purchases and refinancing, wealth protection, retirement planning, life insurance coverage, and tax strategies often need to be priorities to ensure the success of maintaining and growing wealth. The rising generation seems to be missing out on the experience and advice of their very seasoned parents and the advisors they trust. While this is often by choice due to familial considerations, I would like to emphasize that if your children have questions or need help, we are always available to meet and discuss their individual concerns. The earlier they learn and begin implementing a prudent financial plan, the better off that they will be…time---not timing.

As our firm enters its 38thyear of providing advisory services, we want to wish you and your family a happy, healthy, and prosperous New Year. Please contact our office if you have any questions or if you would like to schedule an appointment.

The William Howard & Co.’s Registration Form ADV Part 2A, Part 2B (Narrative Brochure), and Part 3 are available upon request.   

In closing, I want to thank you for the opportunity of working with you and for your continued confidence and trust. 

With kindest personal regards, I am

Very truly yours,


2020 Total Return Index Performance

Asset Class





BofA/ML Three-Month U.S. Treasury



U.S. Bonds

Barclays Intermediate-Term Treasury



U.S. Large Co. Stocks

S&P 500



U.S. Small Co. Stocks

Russell 2000



International Stocks

MSCI EAFE (net div.)



Real Estate

DJ Select Real Estate Securities Total Return



Source: Morningstar


    U.S. Economic Data



33.4% increase (annual rate) – 3rdQuarter 2020



1.6% CPI (less food and energy) and 1.2% CPI (all items) over last 12-months ending October.


Interest rates

Federal Funds Rate range = 0.00 – 0.25%. Fed will maintain until labor markets improve.



December 2020 data - Unemployment at 6.7%; non-farm payroll employment declined by 140,000 jobs; Labor force participation rate 61.5%; Losses in leisure and hospitality and in private education were offset by gains in professional and business services, retail trade and construction.



Manufacturing activity expanded for 8thconsecutive month after contraction in April; December ISM Manufacturing Index registered at 60.7; Sentiment was optimistic but cautious based on continued manufacturing and operation difficulties.


Business Spending

Private non-residential investment improved but remained negatively impacted by the pandemic; New durable goods orders increased for the 7thconsecutive month, up 0.9% in November.


Corporate Profits

3rdQuarter 2020 - U.S. corporate profits increased by 27.1%. S&P 500 Earnings per share = $37.90



November 2020 year-over year data - New home sales up 20.8%; Existing home sales increased 25.8%; Median sales price of existing homes rose 14.6% ($310,800); Housing starts expanded 12.8%; Building permits increased 8.5%; Housing inventory decreased 22% from last year; Unsold inventory = 2.3 month supply (all-time low); MBA fixed 30-yr mortgage rates = 2.86% ending 01/01/2021


Consumer Spending

Disposable income continued to fall; Consumer Confidence Index declined sharply during the quarter based on current business and labor market conditions; Retail and food services sales declined slightly; Total vehicle sales fell after the 3rdQuarter rebound; Personal durable and nondurable spending declined; Personal savings rate continued to trend down.



Oil price (West Texas Intermediate) = $48.35/bbl – 12/31/2020; Gas price (U.S. average regular unleaded) = $2.243/gal – 12/28/2020


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