• What are the positive surprises setting up for 2021?
• What are the consequences of printing and borrowing money?
• What are the most important and most likely accurate forecasts for the Financial Markets?
The Stockdale Paradox “You must never confuse faith that you will prevail in the end—which you can never afford to lose—with the discipline to confront the most brutal facts of your current reality, whatever they might be.” – James Stockdale
2020
The Black Swan, an unforeseen global pandemic, arrived shocking investors in March. The Federal Reserve and Federal Government went into monetary battle mode, like in World War II, infusing disturbing amounts of liquidity and borrowed fiscal stimulus spending to prevent catastrophe.
Many investors sold at the low in March in sheer panic as in 2002 and 2008. Many investors abandoned the principles of Fundamental Analysis selling into a temporary panic, the fastest 38% decline in the Dow Jones in modern history.
We were able to use the protected portion of the portfolios to add great assets with superior cash flow and long-term appreciation potential. The wisdom at this time came from my father, PappaDean McGowan, “Panic Then the Fastest Recovery in History.”
The Asset Categories, Asset Classes, and Tactical Allocation strategies are detailed below. Politics has been a noisy distraction that often guides portfolios in the wrong direction.
Vaccine deliveries have begun, on track for over 200 million people in the first half of 2021.
2021 Intelligence
Our sources predicted the initial record recovery in Q3 after the shutdowns followed by quick action by Washington. Current estimates for economic recovery forecast growth at above 3% through 2021.
Now, with the Economy nearing and exceeding 2019 levels in many cases, intelligence for 2021 is vital. The recovery has now been over anticipated by the Indexes based upon the long-term returns projected by true math and the expansion of technology sector multiples.
Economic growth has returned after astute business leaders have navigated the realities of the pandemic and innovated.
The 2020 multiple expansion and euphoria of Technology stock pricing drove Indexes to undeserved highs like 1999, which led to 12 years of a Range Bound market. How did the McGowanGroup do from 2000 to 2012 in a flat, Range Bound, Equity Market? Keep reading.
Asset Classes and Categories
• Tactical Safety – “Confronting the Most Brutal Facts.” Rates are near ZERO ON CASH, again! Money flows from High Net-Worth Investors and pensions seeking cash yield have already begun to flow into higher yielding investments. This Cash Flow Panic is likely to continue and peak during 2021.
• High Cash Flow – The recovery in our global lending portfolios utilizing 9 great managers indicates that the cash flow panic is underway comparable to 2012. Harvest points at premium capital gains appear likely.
• Growth and Income – The return of Inflation during late 2021 and early 2022 appears to be indicated by the current activity in commodities. The long-term value in dividend companies provides a solution.
The MGAM Investment Committee meets weekly to consolidate the intelligence and data gathered in dedication to making effective decisions for the model portfolios.
Current research is providing bargain candidates for the portfolios in 4 key areas:
1. Innovation Companies
2. Medical Dividends and Technology
3. Clean Technology
4. Energy Infrastructure
Our 2021 targets for current holdings appear to be underway for the model portfolios based upon extraordinary performance during November and December which we will cover individually in your upcoming reviews. As always, we appreciate the trust you place in our firm and we stand ready to serve.
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