It was the year of the first modern pandemic. Will it be the decade of the pandemic, or pandemics? Or will 2021 put the COVID-19 pandemic in the rear view mirror? Well, we’ll be writing that story in a year from now. What we do know is that the pandemic dominated the year in every respect. It dominated and controlled our lives in every way. We had to change the way we worked, and lived. Here is the 2020 year in review.
Certainly, we are happy to say goodbye to 2020. Don’t let the door hit you in the ass on your way out 2020. Or as they would say on Saturday Night Live – buh bye. What part don’t you understand? The buh, or the bye?
The obvious problem here is that 2021 starts just as 2020 ended. We’re in the middle of a pandemic. In fact, in Canada, the pandemic is setting new records. On the bright side, and on the side of hope, very effective vaccines are approved and shots are going into arms.
From a blogging and investment perspective I was one of the first to write about the pandemic. I believe I may have tied some hedge fund guy for ‘first place’. Here was the first post that mentioned the pandemic …
Of course I had no idea that this would become a very dangerous and deadly and global pandemic. But to me, it was obvious that this was a serious event. I remember watching TV and seeing the Chinese building field hospitals getting ready for the dead and dying. To my wife I said “oh shit”. That about says it all.
In all honesty, in March I asked my wife that we look to rent a beach house on Prince Edward Island, take the Moms out of the retirement homes, grab the kids and hide out on the island until the pandemic is a thing of the past. It was not a thought that was taken seriously, even though I was serious in every way. Missed opportunity. As you may know Atlantic Canada has had very few cases.
Our Moms have been mostly locked up in the retirement home. There were several COVID cases in the retirement home. So far we have been lucky. Since the early scare, the retirement home in Scarborough Ontario has kept the virus out of the building. Fingers crossed, knock wood.
The investment thesis from February.
In that first post I had simply suggested that investors do a gut check; are you investing within your risk tolerance level? If not, investors were to make those moves. And that said, we should always invest within our risk tolerance level, and we should always be prepared for a major stock market correction. We just never know the cause of those corrections, and we don’t know the severity.
I had suggested basic and simple asset allocation that pays attention to international diversification. On managing stock market risk, I had offered bonds (including US Treasuries) plus gold stocks and gold price (physical gold holding) ETFs.
US long term treasuries responded well to the risks. The iShares TLT ETF was up 30% early in 2020, and early in the pandemic stages., and still up over 25% into August. The treasuries then started to take a break as stock markets continued their comeback.
That Treasury fund ended the year up almost 18%.
Gold shines in 2020.
And that disaster insurance known as gold certainly did its thing in 2020.
Here’s a look at the Gold Trust ETF GLD for 2020.
Gold was up 23.9% in 2020. Gold even beat US stocks at 18.4% for 2020.
As per those US Treasuries gold has taken a break in recent months as stock markets continue to roar. Here’s the performance of iShares S&P 500 (IVV).
A Canadian Dollar version of the S&P 500 delivered 15.3% in 2020.
On the ETF Model Portfolio page I offer for consideration iShares total market XUU, that Canadian dollar fund delivered 16.2% in 2020.
According to CNN Business the US Dollar lost almost 2% compared to the Canadian Dollar in 2020. We see even greater gains for other world currencies vs the US Dollar.
Other asset classes in 2020.
US stock markets ran away again in 2020. Especially the tech-heavy Nasdaq 100 that delivered over 47% in 2020.
Meanwhile, in Canada, using iShares ETFs as benchmarks.
- TSX 60 up 5.5%
- Core Bond Universe up 8.6%.
- Preferred Shares up 5.5%
- REITS down 13.6%
Here’s more on the REIT sector and Canada’s best performing REIT ETF.
- Developed Markets up 6.5%
- Emerging Markets up 15.3%
- All Country Ex Canada up 12.4%
Emerging markets have been on a tear since the successful vaccine announcements in early November. In my MoneySense post from November 9th, you’ll see a subhead and section that asks – time to move to developing markets?
That is a theme that might continue to play out. At its core level, it demonstrates the importance of International stocks as a core asset, and perhaps emerging markets even more so.
Emerging market bonds might also be a consideration. They returned 2.5% in 2020.
The year of the Balanced Portfolio.
As I had offered in May the cap weighted market index funds were well prepared. In fact, the Balanced Portfolio barely felt a thing in the pandemic.
It was almost uncanny how well-prepared were many of the indices especially the US Stock market. It’s as if the market anticipated what was to come. The S&P 500 was more than well positioned with a heavy weighting to the tech names that would dominate in 2020. It also was well positioned with healthcare and consumer staples and consumer discretionary in healthy weightings.
The index itself made a very nice stay at home fund.
Even in Canada, Shopify became a stock market darling and helped so many Canadian companies pivot to face the challenges of 2020.
The Balanced Portfolio returns.
For balanced portfolio returns we can look to the wonderful iShares one ticket ETF portfolios. Listed in order of least risk to highest risk.
- XINC – 9.4%
- XCNS – 10.3%
- XBAL – 10.6%
- XGRO – 11.4%
- XEQT – 11.7%
Obviously it was a great year to be a patient couch potato investor who was investing within their risk tolerance level. If one was adding monies on a regular schedule they would have been able to boost returns even more.
When stocks failed in March and beyond it certainly was an incredible investment opportunity for those with the tolerance for risk.
And of course, if one had also employed that gold ‘stuff’ and US Treasuries the returns and risk-adjusted returns would have been even greater.
And if they added even a small allotment to bitcoin? Oh boy! That is perhaps the investment story of 2020.
I had told readers a few months ago that I was building a position in a bitcoin fund. That investment is up by some 170% in quick order. A few Cut The Crap Investing readers are more than surprised wondering what to do with their own outsized and quick gains. Stay tuned, for a post ‘on that’.
On the laggard side I had also reported on the dividend ETFs that continue to trail but fight back. Once again, patience and consistency will be in order.
Getting to the other side of the pandemic.
In March I already looked to the other side, believing and hoping that human ingenuity (and desperation) would deliver a solution and potential end to the pandemic.
The world and medical community was certainly pleasantly shocked at the development of breakthrough vaccine technology. It is nothing short of a miracle to develop vaccines within months. Especially vaccines with a 95% efficacy rate. I guess I did believe in miracles. Now it might take a miracle to get those shots in arms. At the current rate, we’ll vaccinate about 10% of the population at some point in 2024.
In this post How does the pandemic end? I reviewed a book from Dr. David Graham. Dr. Graham suggested that the pandemic becomes endemic and it ends with a cold. The virus becomes the common cold, like many past coronaviruses. He suggested or estimated that it would take 2-5 years to complete that transition.
Let’s hope we see a miracle vaccine delivery process in 2021. I will certainly be looking back at this post a year from now.
Happy New Year! I wish you all the best of health and happiness in 2021 and beyond.
Be careful out there.
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