Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

2nd Quarter | 2022

Market insights and analysis


Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.

Things to be thankful for

By David Wismer

For a variety of reasons, 2020 has engendered a wide range of strong emotions for many people: fear, uncertainty, anger, depression, resignation, loneliness, and (unfortunately) sadness and grief.

But for many, there have been more positive and constructive responses: determination, commitment, hope, and a sense of community.

The 2020 election season and various instances of social unrest have contributed to many of these reactions. But, of course, the COVID-19 pandemic has been the overriding factor in shaping how people are feeling this year.

Recent events and the increase in COVID cases are presenting yet another major challenge. My wife is employed as the lead concierge at a senior living facility here in Connecticut. Last Thursday, the facility initiated more restrictive and protective policies reminiscent of those seen last spring and summer. The good news is that the staff is working hard to try to create some semblance of socialization for residents who have lost many of their daily communal activities. They all hope there will not be a total lockdown in the near future.

Many have faced far worse challenges this year. Our thoughts and prayers go out to all who have been severely impacted through their employment situation, their businesses, or their own health or that of family members.

But many things have given people reason to give thanks in 2020. In the spirit of Thanksgiving week, I want to highlight a few of them.

In an entirely unscientific and small sample of colleagues, family members, and friends, here are some of those things people have said they are thankful for:

- Family. This would normally be the answer in any given year, but it has taken on new meaning in 2020. While it has been difficult for most people to give up many outside social, recreational, or community activities this year, the upside is that many have built a new feeling of connection with family. Some say they are doing things together as a family that have never been part of their regular routines, whether at home or by reaching out to more distant relatives in a variety of ways.

- The medical community. It starts with admiration and appreciation for those medical professionals on the front line fighting COVID, but also extends to first responders; administrators; federal, state, and local officials coordinating various efforts and public communications; and the health-care providers taking care of more routine medical needs. Personally, I had several medical procedures this year—thankfully, all of a long-term “maintenance” nature—and I have been struck by the dedication and efficiency of the health-care community under these trying circumstances.

- Work. For those fortunate enough to have held on to their jobs, they greatly appreciate the fact that they are employed, and, in a majority of cases among people I know, have the ability to work effectively from home. In fact, many report that they feel they have been more productive working from home. This, they say, has been due to several factors: an increased sense of personal responsibility and pride, dedication to a team approach and its success, an enhanced focus on team communication, having some scheduling flexibility, and the focus that can come with fewer workplace distractions. Others have worked hard to improve their technology skills, with obvious benefits.

- Charitable outreach. While direct volunteer efforts have been challenging in 2020, many people are finding ways to make a personal impact in their communities. Additionally, according to research from the philanthropic sector, charitable giving “rebounded in the second quarter of 2020, boosting total giving in the first six months of the year by nearly 7.5 percent on a year-over-year basis.” According to data from Fidelity Charitable, Schwab Charitable, and Vanguard Charitable, “Donor-advised funds are showing substantial increases in grants to organizations as well as in inflows to the funds themselves during the pandemic. In response to the economic impact of the virus, donors greatly stepped up their support for organizations that provide basic daily care like food and shelter.”

- Teachers. While many parents and their children have faced an extraordinarily challenging time during the spring and fall school terms, almost everyone I have spoken with has nothing but praise for dedicated teachers trying to deliver meaningful educational efforts throughout the pandemic.

- Hope for the future. The news on very promising vaccine developments, as well as enhanced and constantly improving treatment of COVID patients, has provided some hope for getting closer to normal in 2021. The real timing is uncertain, but nearly everyone is expressing far more optimism for the future than seen in prior months this year.

Finally, when asked his thoughts on the upcoming holiday, Jerry Wagner, Flexible Plan Investments’ founder and president, responded,

“It’s hard to block out the 24/7 news; it seems that, wherever we are, a radio or TV drones on in the background telling us how many problems we have and the difficulties to come. In a time of less-intrusive media than ours, an earlier generation realized that we all needed a day where, instead of focusing on our worries, we needed to be able to focus on that for which we should be grateful. Thanksgiving is the day set aside for this in our country. My staff and I join in taking this time to thank each of you for your trust, your patronage, and your friendship. We are thankful that we are able to be a small part of the American story and your lives. Happy Thanksgiving everyone. May you enjoy God’s blessings in the year ahead!”

2020’s remarkable market performance

As investors, I think most of our readers are also thankful for this year’s market performance, which, in many ways, has defied all odds.

As I wrote some months ago, the market has looked through the current economic uncertainty and hardship to see a more positive future in the intermediate and longer term. This year’s total return for the S&P 500 through November 20 stood at just over 12%, which is good for a “normal” market year. Some companies, major industry groups, and subsectors have had outsized gains, impacted by “favorable” conditions for their specific areas during the pandemic. Other sectors—and businesses, of course—have suffered mightily.

CNN Finance has a pretty interesting tool that provides a view of stocks that have been “influenced” (both positively and negatively) by the pandemic. You can customize the time frames to see trends over various periods. Their current categories include Vaccine Hopefuls; Therapeutic Stocks; “Stay at Home” Stocks; “Work from Home” Stocks; Stocking-up Stocks; Airline Stocks; Hotel Stocks; Cruises, Concerts & Theme Park Stocks; Gaming Stocks; Prevention Stocks; and Oil & Oil Stocks.

On this theme, one of the current “debates” among analysts is how, when, and if a switch flips (due to COVID vaccines and improved treatments) from the current company beneficiaries of the pandemic environment to companies that will do better during a true back-to-normal scenario. Will this be the next great rotation in the U.S. equity markets? There was some direct evidence of this, according to Barron’s, on November 9, the day of the first large vaccine-driven rally. They wrote, “… [A portfolio constructed] by buying stocks with the most momentum and selling the stocks with the least would have dropped nearly 14%, notching its worst day on record.”

Related to this, have user, revenue, earnings, and share price gains for companies such as Zoom or Peloton (or much larger companies in technology, online commerce, and other categories) been brought forward from future years in extraordinary fashion to 2020, or have these companies permanently carved out new and expanded territory in the economic landscape?

It is gratifying to note that Flexible Plan Investments’ dynamic, risk-managed strategies do not attempt to answer such questions on future trends through speculation or guesswork. Strategies such as Market Leaders Sector Growth and Market Leaders Sector Growth Ultra employ a disciplined and risk-managed methodology that uses a top-down, actively managed asset-allocation strategy designed to invest in top-performing equity sectors and reduce exposure to the worst-performing sectors. In addition, these specific strategies use a risk-management tool to monitor each sector’s price trend daily and make timely adjustments as deemed necessary according to a rules-based methodology.

On behalf of Flexible Plan, I want to wish you and your family a happy and safe Thanksgiving!

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