Finding the Good Things in 2020 & Looking Ahead to 2021

Finding the Good Things in 2020

Links Mentioned in this Episode

Complimentary Consultation Lessons Learned from Coronavirus The Power of the Consumer COVID-19 and the Real Estate Market

Dean Barber: Thanks so much for joining us on America’s Wealth Management Show. I’m your host Dean Barber, along with Bud Kasper.

Dean Barber: Well, Bud.

Bud Kasper: Well, Dean.

Dean Turns 55

Dean Barber: Hey, we’re getting close to wrapping up 2020 here, and-

Bud Kasper: Hey, before we do this, I’ve got to say happy double nickel to your birthday.

Dean Barber: Yeah. Well, I woke up this morning and realized, once I started checking out all the senior citizen discounts I’m going to get, how you accumulated all the wealth you have over the last several years since you turned 55 quite a few years before me, but who’s counting?

Bud Kasper: Well, I stuff them in my pockets, rather than money. I get big discounts that way. Big.

Dean Barber: You know you’ve made it when you’ve got more coupons in your pockets than you do cash.

Bud Kasper: There you go.

Finding the Good Things in 2020

Dean Barber: All right. I guess what we want to talk about today is finding the good things in 2020. I want to shout out to my brother Shane, one of our firm’s partners at Modern Wealth Management. The articles and the writing that he has done this year are outstanding at bringing to light what’s really going on. And what I would say is that if all you did were take in the news from the mainstream media, you’d wake up every morning this year about ready to slit your wrists.

It’s as if everything is bad, bad, bad. Yet, as we go through today’s show, we’re going to share some of the most amazing things that happened in 2020 from a market perspective, energy perspective, economic perspective, employment perspective, a housing perspective, the list goes on and on and on here—manufacturing indexes. There’s just a lot of really, really positive things that came out of 2020. I think, Bud, they’ve been glossed over. 

Negative News Pushes Out the Good News

And I also think because the vast majority of people do get their news from the mainstream media, and they either don’t know where to dig deep enough to find the real things that are happening in our world or not. 

I think that many people have been genuinely spooked by COVID-19 and genuinely spooked by the political unrest and the polarization of the two political parties, and what seems like the great divide happening here in the United States today. And being spooked, I think, has knocked a lot of people off their perches, knocked them off of their game plan, if, in fact, they had a game plan in the first place. So we want to talk about those things today.

As you read through this article, if you’re interested in scheduling a complimentary consultation, it’s so easy to do. We can do the complimentary consultations by phone, virtual meeting, or we welcome you in our offices in either Lenexa, Lee’s Summit, or North Kansas City. You can schedule that by clicking here.

Lessons Learned From Coronavirus

Interestingly, Shane wrote another article earlier in the year, and it’s Lessons Learned from Coronavirus. I thought it was fascinating because he talked about how people will find a new way to live. And they may find that there are actually more important things in their life than what they saw because of all of the hustle and bustle. Let’s talk a little bit about that.

Bud Kasper: Well, people hate things forced on them, but this was the case with the coronavirus and everything going virtual as a necessity of being safe. I second your opinion of your brother in terms of a writer. I write a lot myself, but he has a special talent and wonderful way of actually getting to the core of issues that people need to understand. More importantly, he allows readers to enjoy the article because he writes with such a flare.

When we looked at what we experienced from the beginning of the year, and it’s funny, isn’t it, Dean, that some of these days are just indelibly set in your mind. It was February 19th that we hit, at that time, the high part of the market. It was 4.81% at that time, and within 33 days, we dropped 31%. So, a remarkable drop in such a short period.

Yes, people became instantaneously concerned with it. Rightfully so, because these were issues that, in many cases, people hadn’t had to deal with. Now, it doesn’t mean that we haven’t had drops in the past, and most certainly, you and I, in trying to make sure we understood what we might be entering into, went back and reviewed what happened when we had SARS and MERS and Ebola, and even the Spanish Flu a hundred years ago.

“It could be a very ugly time for us.”

I had the opportunity, Dean, and I want to share this with our audience and speak to a client of mine who is a head epidemiologist at a major university, a major university. His laboratory, which is named after him, worked directly with Gilead Science and the creation of Remdesivir, which treats the symptoms of the disease and Moderna. I’ll say I needed to hear his expectations and how bad this would get because of my selfishness. And quite frankly, his comments were, “It could be a very ugly time for us.”

Dean Barber: And you know what, from the perspective, Bud, of what COVID-19 has done, you’re right. There has been a lot of panic, ugly, and uncomfortable times. But there’s a lot of good that has been born out of this. We’re going to talk about some of the record-setting things from an economic and a social perspective that I think will shape how we live our lives in the future. 

It should change the way that we invest. It could change the way that we think about money. Also, it’s changing the way that people look at their own lives. It’s causing them to step back and say, “What’s truly important to me, and what do I want to accomplish?” And that’s precisely what we do with our Guided Retirement System™ to help you understand what’s important to you and drive your plan in that direction. You can schedule a complimentary consultation by clicking here. 

Now I would like to go through some of the great things that happened in 2020.

The Markets in 2020

Okay, Bud. The markets.

Bud Kasper: Yes, sir.

Dean Barber: Look at this, as we do this show, we have the S&P 500 Index on a year-to-date basis, Bud, with dividends, obviously, up over 16%. We have a Dow Jones Industrial Average up nearly 15%. We have the Morningstar Global Markets ex-US Index up over 8% on the year. If we looked at this, Bud, in any given year over an 11-and-a-half-month period, we would say, “Terrific. This has been amazing.” Right?

Bud Kasper: Oh, absolutely. And when you think about it, last year, in 2019, the S&P 500 was up 28%. Take your 16, add them together. We’re coming up with a 22% return average over a two-year time frame. I mean, who would’ve thunk it, right? Especially in the face of what we’ve been dealing with as a nation. It’s such a sad situation for so many people who aren’t going to have some of the loved ones they darned well should’ve had at their Christmas dinner this year. But unfortunately, even though we did our best to react to it, we couldn’t come up with a solution.

How Can You Prepare for Something Like COVID-19?

Dean, I’m going to sidestep for just a moment here. Did this ever cross your mind: How can science prepare for an epidemic and pandemic of this type of magnitude? You would think that perhaps they’re already working on coming up with vaccines for future issues that come up, similar to what we’re experiencing now. Now, I probably don’t know enough about science to be able to comment on that, but boy, it sure would’ve been great if we would’ve had something that was well prepared, rather than having to wait over a year before we got what seems to be, now, a solution.

Fast Vaccine Development 

Dean Barber: Well, but what’s interesting, Bud, is that if you look at how fast this vaccine was developed, it is by far the fastest in the history of any vaccine. We’ve never had any prospective vaccines for a pathogen entering into the final stages of trials as rapidly as they did for COVID-19. And look at how rapidly, then, we got the emergency use from the FDA. So the Operation Warp Speed, I believe, was instrumental in bringing those things together. By the way, I believe that the whole thing has been instrumental in what the market has done this year. Because if you think about this, the S&P 500 fell by 34% in just 33 days, bottoming out on March 23rd.

Bud Kasper: Yeah. Peak to trough.

28 Record S&P 500 Record Closes

Dean Barber: Right. Subsequently, the S&P 500 has had 28 record closes and is now up in excess of 16% this year, Bud.

Bud Kasper: Amazing.

Dean Barber: The Nasdaq Composite has over 36 record closings this year. Change the way that people think. But, Bud, why is all that happening? Well, where is unemployment? Aren’t there still people out there that are struggling? There are. There’s zero question that there are. But the reality of unemployment, Bud, is that we saw a spike of just under 15%, and now we’re back down to about 6.5% unemployment.

Bud Kasper: Completely. 

2020 is a Positive Year in the Markets

Dean Barber: If we go back to what I talked about in the opening segment, and that is, if you woke up right now, here in mid-December, and you looked at what the markets have done since January 1st, you’d say, “Wow. Good year.” Right?

Bud Kasper: Right.

Housing Market is on Fire!

Dean Barber: I mean, I’d take one of these every single year. But the rollercoaster that we had to get on to get there is insane. And the bad news that is on television, social media, every single day. The bad news doesn’t tell you all the good things that are happening. I’m trying to say, where we are with unemployment today, Bud is incredible. Where we are with 30-year mortgages today, did you ever think you’d see 30-year mortgages at 2.5%? The housing market is absolutely on fire. And when the housing market’s on fire, that leaks into all kinds of different parts of the economy.

Bud Kasper: Exactly right. Plumbers, electricians, all the things that help build the homes for America. So, the one question I’m getting, though, is, “What’s it going to do next year? What’s going to happen with this market?” Well, I think we have to go back to the election. So, under the fact that Joe Biden was-

Back to the Georgia Runoff

Dean Barber: Do we have to do that?

Bud Kasper: Oh. We do. But when we look at-

Dean Barber: I want to move forward. Go ahead.

Bud Kasper: The electors just this past week came in, and it’s official. Joe Biden is going to be president of the United States. But I’m going to tell you that the big date we should be focused on is January 5th.

Dean Barber: Correct.

Presidential Cycles

Bud Kasper: Because if you look back at presidential cycles, which we’ve discussed these in years past, in terms of what the implications are when you have a Democratic president or a Republican president. Of course, the more important thing is who’s running the House and who’s running the Senate. When you have checks and balances, as we have presently, where the Senate is in the control of the Republicans, and the Democrats control of the House of Representatives, that adds balance to the occasion.

Bud Kasper: And the matter of fact, historically, I can tell you that whether there’s a Democrat or a Republican in the White House isn’t going to be the significant issue that’s going to change things in America. However, there is a January 5th election coming up in Georgia, and if it splits, there are two seats. If one goes Democrat, one goes Republican; then the Republicans will stay in control. If the Democrats get both seats, then the game is over. Now we’re going to have a one-party bias on both sides of the houses. And if that’s the case, we’ve got to rethink what this market might do, with total Democratic control.

Market Reaction to Biden Victory

Dean Barber: When the markets originally started going up after the election, people thought, “Well, it’s because Joe Biden won.” And the reality is, no, it’s not. Because it was almost apparent at that time, and nobody knew that we would have to have all these runoffs and all the other stuff. But now, the markets are looking and say, “You know what? We have a divided Congress. That’s what we wanted. That’s the outcome.” Right?

Bud Kasper: Right.

Dean Barber: And so that’s why the market started rallying. Why? Because we’re not going to come in with these radical tax increases, these excessive regulations and environmental things that were going to be pushed out. That is because there are going to be checks and balances. If there are no checks and balances, that’s where you’re saying, “It’s a game-changer.” I’m in total agreement with you, Bud. There’s another thing that could change the game for 2021, and that is that the vaccine proves not to be effective as it has been tested. And so-

Bud Kasper: God forbid.

Dean Barber: There are still some things out there. Look. Here’s the thing. We got through 2020, and most of us are far better for it. In the face of adversity, we can find opportunities. And if you didn’t find the opportunity this year, you didn’t look very hard because the opportunity was abundant. Here’s the thing. Schedule a complimentary consultation, which we can do by phone, virtual meetings, or in person. We’re happy to do that. 

The Resiliency of the Economy

Bud, I want to get into some of the mechanics of the economy’s resiliency. We talked a little about the unemployment recovery rate. I want to talk about median incomes and the growth in incomes, the 30-year fixed mortgages, single-family home sales, both new and existing, the homeownership rate, and manufacturing indexes, all kinds of things that people need to be aware of. These are the good things that came out of 2020.

The Power of the Consumer

[Music Playing: With a Little Help from My Friends – Joe Cocker]

Dean Barber: Welcome back to America’s Wealth Management Show. I’m your host Dean Barber, along with Bud Kasper. I love that song because I think that could be another one of our theme songs from 2020, Bud, I get by with a little help from my friends by Joe Cocker. Here’s what I mean. I want everybody to read the article written by my Shane brother called The Power of the Consumer. The consumer is your friend. 

But, Bud, let’s talk about the power of the consumer. Let’s talk about getting by with little help from our friends. I’m going to tell you this; I’m getting by with a little help from my kids’ friends. I’ve got five children, ages 20 to 30. They’re buying homes and getting ready to start families. They’re doing what the entire Millennial generation is beginning to do. Get married, buy houses, have babies, and you know what happens, Bud, when that happens?

Bud Kasper: What?

Dean Barber: The economy goes boom.

The Downtown Contradiction

Bud Kasper: No doubt about it. We have a bit of a contradiction, though. If you look in Kansas City alone as an example, where we reside, and you look at downtown. What was it? Fifteen years ago, we had a real revision with something called Power & Light. And when that happened, downtown was not very active. It didn’t have the exciting things that people wanted from an entertainment perspective and things like that. But we built that, and they came. So what we started seeing is, especially some of the younger folks, the Millennials that were going downtown, repopulating apartments and things like that. And it was great.

The Millennial Shift 

But now we see the economy start to shift, and I hope it doesn’t have too much of a negative impact on downtown people, but my point here is now they’re meeting their ladies, they’re meeting their gentlemen and getting married, and now they’re doing what? They want to have a family. So what are they doing? They’re going out to suburbia. So we’re seeing a little bit of a shift occurring with that, so when you look at what’s happening in the real estate market, you see that the demand is just incredible. Folks, we thought in my generation that the Boomers were powerful. I’m telling you, these Millennials are an economic powerhouse, which is a positive going forward for both the economy and the markets.

Dean Barber: Oh, you’re so right, Bud, you’re so right. You’ve got to see the charts to understand that power. New single-family home sales have quadrupled since 2010. They’re higher than any time in history except for the boom coming at the end of 2002, 2003, as we went out of the dotcom bubble where tons of money started going to real estate. We see something unprecedented in our real estate market. And much of it is the Millennial. Again, I mentioned four articles written and people. I’m telling you this because you need to understand the bigger picture of what’s happening.

Mistakes Will Be Made

If you take all of what you’re going to get, and you’re going to make decisions out of the mainstream media, you’re going to make mistakes, and not just small mistakes, you’re going to make big mistakes. They sensationalize; they emotionalize. We’ve got it down to the facts. The articles I’m referencing, Lessons Learned from Coronavirus, The Power of the Consumer, and COVID-19 and the Real Estate Market, can all be found on our website.

When you think about new single-family home sales, they are spiking up, and again, four times what they were. And think about what happens. Think about what happens when you buy a new home. What do you get to do? You get furniture. And for the first time home buyers, you’re buying all the lawn and garden equipment, everything that goes in with buying a house, and that spurs all types of different parts of the economy.

Manufacturing and the Housing Boom

If you look at the manufacturers purchasing index, you look at where that was at a 37 back early in the year. It’s back up to almost 58. So the last time it was that high was back in 2014. So we’re above where we were in 15, 16, 17, 18, and 19. Anything above 50 is expansion. We are there. We are there. The expansion isn’t because of the federal government’s stimulus, but because of the American consumer. You get by with a little help from your friends. When your friends are out there, they’re buying, consuming, they’re doing what they do at 70% of our GDP.

And I’m telling you, Bud, we’ve been talking about this internally now for probably the last five to six years. The decade of the 20s could legitimately repeat the roaring 20 of the 1900s. Why? The power of the consumer. Seventy-eight million Millennials are getting married, having babies, buying houses, and doing all the things that go along with that.

It’s more people, Bud, than the Baby Boomer generation and the income levels, the income levels are increasing at an unbelievable rate. We’ve got charts on what those income levels are doing as well in that article. Look, here’s the thing. If you’re not prepared for this, if you’re going to sit back like Chicken Little, or if you’re going to do the old tired buy and hold strategy with your underlying investments, you’re going to miss out. Things are shifting, things are moving, and things are going at a faster rate than what you fathom.

Building a Retirement Strategy that Considers Economic Factors 

Don’t get gripped by fear. Let us help you create a retirement strategy that encompasses all the things that Bud and I are talking about today. We use our guided retirement system. You’ll be amazed at what you see—the clarity, confidence, and control you can have over your financial future. If you do nothing else, read these articles, and get the information you need to make wise decisions. If you want to help, get a complimentary consultation, you can schedule your meeting right there on the website.

Stimulus Support

Bud Kasper: You know, Dean, I’m supporting another stimulus plan. People are hurting even in good times, as we’re talking about in terms of markets. We need that. And then what we need is the vaccine. And when the vaccine comes in play, now that will re-stimulate the economy, and I think we’ll see a huge benefit from that and look forward to it, right? 

Dean Barber: Well, there’s no question. And I believe, Bud, that if the vaccine proves as effective as what the trials show, and if we wind up with a divided Congress, like what we talked about in the last segment, 2021 should be another good year in the markets. Hopefully, it’s less dramatic. Hopefully, it’s less exciting. We could certainly use some of that.

Hopefully, the economy is driven by the consumer getting comfortable that they can get out and do what they want to do. So many of my clients that I’ve talked to, Bud, virtually are saying, “Man, We had to cancel this trip. We had to cancel that trip, we didn’t get to do this, or we didn’t get to do that. But you know what? We got the money ready to deploy, and we’re going to spend it.” And let me tell you when that happens, the economic activity will be huge, and it should increase our market activity.

Bud Kasper: Exactly right. And that’s going to make the new year a very exciting time.

Dean Barber: Well, make sure that you prepare for it. Schedule a complimentary consultation by clicking here. Sit down with a CFP®, along with our CPAs, estate planning attorneys, get everything done to prepare for a great 2021. 

The Height of the Pandemic to Today in the Markets

It’s interesting, Bud, because as we look back at 2020, we look at the height of the pandemic, and some people might say that we’re at the height of the pandemic today. However, from an economic perspective, from a financial perspective, we are so far out of the depths of what we consider to be a horrible, and record fast, bear market that hit us back in March. We’re so far away from that. Our economic signs are pointing to the moon. It’s like Buzz Lightyear. To the moon. It’s like-

Bud Kasper: Infinity.

Dean Barber: Infinity and beyond. The data in this article by Shane is from the Census Bureau, the Department of Housing and Urban Development. These are coming from the National Association of Realtors. We’re taking information directly from government sources, looking at manufacturing, looking at the Purchasing Managers’ Index, and looking at the Services Purchasing Managers’ Index. 

When you look at the charts, and you put in perspective what has gone on this year. You believe, Bud, that the economy is a leading indicator to market activity as opposed to the market being a leading indicator to economic activity. If we believe that that is the case, we should be gearing up for an outstanding start to 2021.

Returning to the Georgia Runoff

Bud Kasper: With the one linchpin, and that’s Georgia. I think that’s going to have an impact that needs to be recognized, and we might have to deal with it from the standpoint of portfolio development. But going back to what you were talking about-

Dean Barber: Wait a minute. Wait a minute.

Bud Kasper: Sure.

Dean Barber: Who’s running in Georgia? I saw Joe Biden tried to give a stump speech for, what’s his name?

Bud Kasper: Yeah, I can’t remember.

Dean Barber: That was what he did. What’s his name? You should vote for whatshisname.

Bud Kasper: I’m trying to make an economic point here, not a political one.

Dean Barber: And I’m hoping that when in, what is it going to be, 19 years, that I’ve got a little bit more mental faculty than that.

Bud Kasper: Well, we hope so. You’ve got room to grow.

Dean Barber: Yeah.

Peak to Trough

Bud Kasper: Hey, let’s go back to what you were talking about. We had that significant drop that on March 23rd, from peak to trough, represented an approximately 35% drop. And in three days, three days, it made up 12%. And from that 12%, it continued to go up until it finally broke even and then continued to move forward.

Dean Barber: Now, we did have, back in the mid-summer, about early summer, about a 10% correction, if you’ll recall that. You look at that on a grand scheme of things, and it looked like a little hiccup, but again, it was a pretty quick correction. It was about a week with a 10% or so decline. And once again, people that panicked in March panicked again then. People haven’t got to experience the results. Maybe they should have, but due to panic and the negativity that’s out there in the news, Bud. That’s my point.

Who Leads Who? The Stock Market or the Economy

Bud Kasper: So you asked me the question, does the stock market lead the economy, or the economy the lead stock market? I said I think it’s the economy leads the stock market. When you look at what was going on in the downturn, most certainly, we didn’t know the depths of despair that this thing was going to cause. And therefore, taking a chance, I’ll call it, on the market rebounding at that time was certainly circumspect.

And it was only because of the increase in the improvement of the market that people finally settled back in and said, “You know what? We’re going to get through this.” And the fact is, we did.

Existing Home Sales and New Furniture

Dean Barber: We talked about new home sales, but I want to talk about existing home sales because we understand what happens. Let’s think about this. 

Now, I’ve seen this happen, and I’m not going to point any fingers or name any names, but I’ve had clients that have said, “Well, we’re going to buy a new home.” So we budget for the new home, and then all of a sudden they buy the new house, and one of them calls me and goes, “Hey. Didn’t realize when you bought a new home, that meant you had to get all new furniture because there’s no way you can move all this old furniture in this new home.”

So once again, it leaks over into different parts of the economy. But I digress. Okay. So let me go back to my point. Existing home sales today have only been higher for a total of 18 months in the history of tracking new home sales.

Bud Kasper: Wow.

Dean Barber: 18 months. And you know when that 18 months was, Bud?

Bud Kasper: No.

Highest Existing Home Sales Except for One 18 Month Period

Dean Barber: It was from mid-2006 through the end of 2007 at the height of the real estate bubble spurred by the global banking crisis. So one time, for 18 months, did existing home sales eclipse where we sit today. That, to me says, you sit back and watch what happens to the rest of the economy. Think about all the money that’s pent up and saved, and where are we going to go? What are we going to do? How are we going to spend it? Let’s get out. Let’s do it.

Bud Kasper: Right. And I hate to keep coming back to this, but it’s ever-present in my mind, and that is the situation in Georgia. I’m looking at things that could derail what we might anticipate as a continuation of an improving economy and, therefore, an improving market. I think it still comes back because if we get more spending going on, taxes increasing, my concern is that that could very easily stymie the market, and we could find ourselves back treading water and trying to find the end of the rainbow, find that pot.

Don’t Miss Opportunities Like November 2020

Dean Barber: Well, let’s address that deal when it comes, Bud. I mean, I don’t think we make decisions today based on what we think will happen on January 5th. A lot of people, many of you listening right now, made decisions before the November election. “Oh my gosh. What if Joe Biden wins? Dah, dah, dah, dah, dah. We got to get out of the way. Let’s just sit on the sidelines for a while.” Well, guess what happened? You missed the best November in the history of the markets. Okay?

Bud Kasper: Yeah.

Dean Barber: And look, and December hasn’t been so shabby itself.

Bud Kasper: Yeah, no. It’s looking quite good, really. It seems like we’re going to finish with another fabulous year. Two in a row, by the way, Dean.

Santa Claus Came Early this Year

Dean Barber: Yeah. Santa Claus came early this year, didn’t he?

Bud Kasper: He sure did.

Dean Barber: Here’s the thing. We have so much great data for you to look at the good things that have happened in 2020. We’d love to talk to you about your personal situation in a complimentary consultation; you can schedule yours here. We can visit via phone, virtual meeting, or we’re happy to sit down and meet with you in person, whatever you’re comfortable with. 

I appreciate all of you joining us here on America’s Wealth Management Show. I’m Dean Barber, along with Bud Kasper. We’ll be back with you next week, same time, same place. Everybody stay healthy and stay safe.