BMO Nesbitt Burns
1 First Canadian Place
38th floor, P.O. Box 150
December 2020 - Monthly Update
2020 was a unique year - one we will never forget.
While many of us were personally distracted with the significant changes to our lives, your portfolio was resilient and locked in strong profits with an above-average year of return.
In addition, the robust profits of 2019 were compounded in 2020 (including gains in the month of December).
Two important points about how your wealth behaved over the year:
1) You were insulated from the historic declines markets posted from mid-February to the end of March
2) You have and continue to participate in the recovery that began in April
The outcome of our process is that your capital is protected during difficult periods while growing when times are good.
Also, and most importantly, our process is repeatable. 2020 reaffirmed the importance of being properly diversified at all times and owning a productive mix of investments that make money over time yet do not all behave the same way day-to-day.
Our strategy of finding and investing in ideas that align with the positive trends while avoiding the negative is sound.
History tells us that trends are more enduring and last longer than one often realizes in the moment. It is this change at the margin that leads to positive surprises and momentum for participating businesses.
Two examples: Working from home and 0% interest rates.
The industry and newspapers are going to spend tremendous energy predicting when these examples will go back to normal. It is highly unlikely they will get it right. This focus misses the more important point: The key takeaway is that both will last (to some degree) for much longer than one might realize.
It is this enduring change at the margin that produces longer-term tailwinds and outsized gains for our investments.
For all the records set in 2020 - this week’s stat caught some (not us) by surprise - the number of new business start-up applications in the US set a record in 2020. What is more, it beat the prior record (set in 2019) by 25%!
From our perspective, this demonstrates the underlying strength and resiliency of the US economy and a sign we are getting closer to a new cycle of organic growth.
You remain in a strong position financially.
The view from Brian Belski, BMO’s Chief Investment Strategist:
“US stocks finished a tumultuous 2020 on a strong note [and] gain for the year. Vaccine rollouts and the $900 billion COVID-19 relief package were the big upside drivers during the month, but growing concerns over stretched valuations, rising coronavirus cases, and a new variant strain of the virus appeared to dampen some of the optimism. As we look to 2021, we are bullish on the outlook for US stocks ... At the same time, we acknowledge that periods of uncertainty will arise and the bull market will face some bumps along the way as the economy continues to recover. As such, we advise investors to employ a disciplined and active approach to investing instead of trying to time the market at every turn, and use bouts of weakness as opportunities to add to favored portfolio positions…. In a record-setting and volatile year for global equities, the S&P/TSX still managed to post [a] gain on the year. Additionally, the TSX closed the year on a strong note… While momentum slowed after the strong November, the more cyclical areas continued to the lead the market in December... Furthermore, fundamentals continued to improve during December with both trailing and forward earnings growth continuing to rebound from the lows… As such, we continue to believe the TSX is well positioned to maintain positive momentum heading into 2021..” Portfolio Strategy – January 2020. BMO Capital Markets.
- Stocks in your portfolio that made a new 52 week high this past month: Accenture*, Johnson & Johnson*, Qualcomm, S&P500 Index
- Stocks in your portfolio that made a new 52 week low this past month: None
- The Loonie gained another one and a half cents versus the US dollar to $0.785 (a two year high)
We wish you all our best,
Ian, Gab & Kaitlyn
* This specific security is covered under the research of BMO Capital Markets. For a full list of company specific disclosures keys please visit https://research-ca.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx
or ask your BMO Nesbitt Burns Investment Advisor for a copy.