2021 Q1 Newsletter
First Quarter 2021 – The first quarter of 2021 was part of the rebound from the market low at March 31, 2020, pegged as the sharpest rebound from a recession in market history, a scant twelve months. Small companies (DFSTX) had the sharpest quarter and one year rise catching up with large companies (DFUSX). International (DFIEX) showed signs of life. Real estate (DFREX) improved but worthy of note is that the three-year annual returns 11.20% is close to the small company three-year returns 12.22%. Bond returns were negative due to interest rate increases. (-4.28%). Our balanced 60% equity/40% fixed income investment (DGSIX) returned 39.08% for the year and annual return of 9.27% for the three-year period. The cautionary note for these remarkable returns is that quarter and year were market recovery periods. You were patient during these periods and were rewarded.
What’s ahead for the market – The quarter has been tumultuous. We have had a multitude of presidential election challenges with recounts, court cases, electoral college voting and civil unrest at our Capitol. This has been followed by the state electorates proposing hundreds of new bills to change election qualification. While state election personnel should have been widely lauded for a remarkable performance during a pandemic, some were greeted with death threats. And with the 2020 census, each of the states will be redrawing election boundaries, which brings gerrymandering into play.
The market has adjusted well to the turmoil in Washington DC and elsewhere because sales and profits are improving due to the Covid vaccine distribution. A massive $1.9T Covid relief bill was passed and benefits are flowing where sorely needed. Service businesses like restaurants are reopening and employees are returning to work. Unemployment is down to 6%.
The market is expensive because pricing is predicated on performance eighteen months in the future. The gains in the chart above, as well as projections, have been baked into the market prices. The market appears good for the long term, but you may see some corrections from the current pricing in the near term.
The price we pay for inequity– With our current governance, we have inequities in voting, jobs, health care and education. Mary Daly, President of San Francisco Federal Reserve said, "We looked at the economy if we eliminated inequities in our society, in employment, in skill distribution between men and women, Blacks and whites etc. In 2019 we would have gotten something close to $2.7 trillion of extra output if these inequities were gone." In effect, unless and until our ideals as stated in the Declaration of Independence are put into practice to include all Americans, we are leaving $2.7 Trillion on the table.
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness.
Our future - The US population is projected to be 360M by 2030 and the world population 8.5B. From a business perspective, we have 8B potential customers outside the US for our world class products and services. Today, corporations are using ESG (environmental, social and governance) metrics alongside their financial metrics. Attitudes among business leaders are changing because it’s good business. We can achieve remarkable success by 2030 as we continue to chip away at our inequities and secure free and open elections for all qualified citizens as well as access to jobs, education and health care. The United States, after all, is a democracy unimaginable during most of human kind.
In Karen’s Corner: Looking for a vaccine appointment? – Here is a tool that may help you navigate the maze of pharmacies’ online appointment systems. https://www.vaccinespotter.org/ Opt In for Email – You could be reading this on your computer instead! Let me know if you are interested in receiving your quarterly newsletter and report via email. You can have it sent to multiple addresses, too. Just call or email me with your instructions. Fraud Prevention Pen – Writing checks may be turning into a lost art but there are still times when you just need to write that check. Did you know there are pens with ink specifically designed to prevent fraud? The ink bonds with the paper so that the check can’t be altered by washing away the ink. One such pen is the uni-ball 207, developed in part by famed criminal-turned-security consultant, Frank Abagnale. We have a limited supply in stock at the office so be sure to pick one up for yourself if you’re in the neighborhood.