4th Quarter 2020 MARKET COMMENTARY

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Global investment markets continued their recovery in the 4th quarter of 2020. This rounded out a volatile, but successful year for investors in the middle of a global pandemic. While equity markets were led by growth companies for the year, the 4th quarter was led by value companies. This is highlighted in the NERT model allocation holding, Dodge and Cox Fund, which was up 20.9% in the fourth quarter.  Markets reacted positively to election results in the United States, an additional $900 billion stimulus package passed by the United States Congress, and emergency use vaccine approval in the United States and Europe.

In December the Food and Drug Administration (FDA) issued an Emergency Use Authorization (EUA) for the Pfizer-BioNTech COVID-19 vaccine on December 11th and the Moderna COVID-19 vaccine one week later on December 18th.  This was a record-breaking time for vaccine approval.  Moving ahead, the vaccine rollout will play a critical role in global growth in 2021 and beyond.  If successful, it will allow global economies to open fully, as lockdowns can be lifted, allowing people and companies to get back to regular activities.  Currently, both approved vaccines require two shots; the initial vaccine, and then a second shot three to four weeks later.  It is also worth noting there are additional single-dose vaccines that are still going through clinical trials. The rollout will clearly be a great challenge.  In the United States, it will rely heavily on the distribution organized at the state level.  At this time, governors of each state have chosen different groups of people that are eligible for the first dose based on occupation, age, and other factors. In most cases, this is based on CDC guidelines. It is still to be determined if there will be increased coordination with the states under a Biden Administration.  It is our belief that if the vaccine rollout can happen relatively smoothly, 2021 can be another solid year for investment markets, but any major setback would disappoint investors and lead to another volatile year.

 4th QTR                    1YR                          3YRS                   3YRS

Stable Income                                    3.85%                 6.15%                       4.42%                 4.94%

Conservative Income                         5.49%                 7.20%                       5.58%                 6.32%

Traditional Pension                            9.25%                 9.37%                       7.49%                 8.61%

Equity Oriented                                12.03%                 9.19%                       7.88%                 9.43%

NERT Model Allocation – Choices for every investor

The NERT model allocations are designed to help participants build diversified allocations to capture the major market sectors and a variety of management styles. They are offered to aid typical participant needs for diversified, risk-adjusted allocations. NERT rebalances allocations on a regular basis attempting to keep a consistent risk and asset posture. The allocations will maintain some exposure even in underperforming classes. Diversification, by definition, means not all assets can have positive performance every period. The NERT model allocations are designed to allow any investor to participate in proven ways to reduce risk and improve returns over longer periods.

As communicated in April 2020, given the current limitations on withdrawals from the Principal U.S. Property Fund, we created model allocations that removed the Principal U.S. Property Fund.

Andrew Casteel, CIO, CFP

Acorn Financial Advisory Services, Inc.