Robert Toomey, CFA/CFP, is Vice President of Research for S. R. Schill & Associates on Mercer Island.

Robert Toomey, CFA/CFP, is Vice President of Research for S. R. Schill & Associates on Mercer Island.

One year later: COVID’s impact on the stock market | Guest column

  • Thursday, April 8, 2021 4:10pm
  • Opinion

It has now been over one year since the economic shutdowns and human lockdowns began as a result of the covid pandemic. The pandemic has altered our lives in ways many could not have anticipated.

Of course, the good news is the miraculous development of several effective vaccines in a very short time period. Vaccines are paving the way for herd immunity which some experts believe we could reach by late summer in the U.S. This has positive implications for the economy which appears to be on verge of a significant surge in growth over the next couple of years.

In addition to the vaccines, the recently signed federal stimulus bill is also expected to exert a very positive force for growth for the next several years.

The good news pertaining to the vaccine and fiscal stimulus has had a very positive impact on the stock market. After witnessing the fastest bear market on record in March of 2020, the stock market measured by the S&P500 index gained 56% in the year ending March 31, 2021, probably the fastest one-year bear market recovery on record. But what have we learned over the past year as investors?

If we look back one year ago, there were many Wall Street “experts” who became very cautious in the Spring of 2020 due to the uncertain outlook resulting from covid. While in hindsight, the cautious opinions may have made sense, they proved wrong and many investors who remained on the sidelines missed a tremendous opportunity for growth.

The lesson here? Trying to time the market is a risky proposition and virtually impossible to do consistently. As financial planners, we don’t recommend it.

Other lessons we’ve learned? For one, do not underestimate the power of fiscal and monetary stimulus in driving positive investor sentiment.

So one year later, what are some of the implications of these developments for us as both investors and financial planners?

First, diversification in one’s investment portfolio continues to be of paramount importance in reducing risk and increasing probabilities of one achieving the goals of their financial plan. Diversification helps to reduce portfolio volatility when the stock market declines.

Second, the nature of this economic recovery is resulting in a rotation away from very high valuation (mostly new-age tech) stocks to more cyclical and “value” stocks. The reason for this is rising interest rates which reduce the valuation investors are willing to pay for companies that have little or no free cash flow. As a result, investors are moving more funds into areas like industrials, financials, and quality dividend paying stocks and we expect this trend could continue for some time.

Finally, there is concern that the unprecedented level of fiscal stimulus and monetary accommodation could result in higher inflation. As investors, we believe it makes sense to hedge for this possibility by owning quality industrial, financial, and metals stocks that have a history of consistent and growing dividends.

Robert Toomey, CFA/CFP, is Vice President of Research for S. R. Schill & Associates on Mercer Island.


In consideration of how we voice our opinions in the modern world, we’ve closed comments on our websites. We value the opinions of our readers and we encourage you to keep the conversation going.

Please feel free to share your story tips by emailing editor@mi-reporter.com.

To share your opinion for publication, submit a letter through our website https://www.mi-reporter.com/submit-letter/. Include your name, address and daytime phone number. (We’ll only publish your name and hometown.) We reserve the right to edit letters, but if you keep yours to 300 words or less, we won’t ask you to shorten it.

[flipp]

More in Opinion

Guest columnist Greg Asimakoupoulos is chaplain at Covenant Living at the Shores in Mercer Island.
With praise for St. Arbucks | Guest column

A milestone worthy of celebrating recently came and went and hardly anyone… Continue reading

Robert Toomey, CFA/CFP, is Vice President of Research for S. R. Schill & Associates on Mercer Island.
Financial planning implications of Biden’s tax proposals | Guest column

As financial planners, we understand that taxes and tax management can have… Continue reading

Federal Way resident Bob Roegner is a former mayor of Auburn. Contact bjroegner@comcast.net.
Democrats, Republicans, budgets and taxes | Roegner

Because the Democrats control the state’s House, Senate and the Governor’s Office,… Continue reading

Guest columnist Greg Asimakoupoulos is chaplain at Covenant Living at the Shores in Mercer Island.
National Poetry Month: Rhymes and reasons not to | Guest column

April is National Poetry Month. It was established 25 years ago this… Continue reading

Jayendrina Singha Ray is a PhD (ABD) in English, with a research focus on the works of the South African Nobel Laureate John Maxwell Coetzee. She teaches English Composition and Research Writing at Highline College, WA, and has previously taught English at colleges in India.
Asian women and racial violence in the aftermath of Atlanta | Guest column

In her famous essay “The Laugh of the Medusa,” Hélène Cixous resurrects… Continue reading

Federal Way resident Bob Roegner is a former mayor of Auburn. Contact bjroegner@comcast.net.
Violence Against Women Act becomes political victim | Roegner

The last thing this country need is to politicize violence against women.… Continue reading

Robert Toomey, CFA/CFP, is Vice President of Research for S. R. Schill & Associates on Mercer Island.
One year later: COVID’s impact on the stock market | Guest column

It has now been over one year since the economic shutdowns and… Continue reading

Guest columnist Greg Asimakoupoulos is chaplain at Covenant Living at the Shores in Mercer Island.
Unmasking our hope this Easter weekend | Guest column

This is the weekend that Christians around the globe celebrate the resurrection… Continue reading

Federal Way resident Bob Roegner is a former mayor of Auburn. Contact bjroegner@comcast.net.
Tax on capital gains stirs debate in Olympia | Roegner

Going into the 2021 legislative session, there were many major issues for… Continue reading

Robert Toomey, CFA/CFP, is Vice President of Research for S. R. Schill & Associates on Mercer Island.
Let’s take a closer look at the Fed and inflation | Guest column

The stock market has recently experienced mild turbulence due, ironically, to concerns… Continue reading

Guest columnist Greg Asimakoupoulos is chaplain at Covenant Living at the Shores in Mercer Island.
When interruptions become opportunities | Guest column

The Chinese character for the word “crisis” is actually the linkage of… Continue reading

Stock photo
The right to vote helps rehumanize incarcerated people | Guest column

By Kim Bogucki, For The Reporter In 2008, I began asking incarcerated… Continue reading