• Brock Williamson, CFP®

Mid-Year Economic Recap and Investment Perspective.


During the Covid-19 outbreak, our family watched Back to the Future (parts 1 and 2) with our children while quarantined. I could not fully stomach watching all 3--It got pretty repetitive. In the second movie, future Biff goes back in time via the legendary, time-traveling DeLorean and gives his younger self a sports history book. He made a fortune from betting on the outcomes he already knew. If only we had a book from the future...

The reality is we make all investment decisions on present circumstances and understanding. While we can sometimes foresee trends and demands, the market and economy are always uncertain. We have a lot at play right now – all at the same time. Whatever happens, at some future point we may look back and everything will seem so obvious – it often does in hindsight.

We cannot predict what is going to happen (no one can, no matter how confident they may sound). But that doesn’t mean we don’t prepare for various outcomes and consider our options.


Before I get into some of these considerations, I need to emphasize that I am not recommending any change in strategy. Your plan accounts for uncertainty; the very nature of the markets is uncertain. This is more about mentally preparing ourselves for whatever may happen and understanding that without perfect foresight, a disciplined and diversified approach is the best option.

  • We had the quickest stock market sell off and recovery in history. The market has literally been a “V shape” to start 2020. However, the economy is not a V shape, nor is it likely to be.

  • There is great anticipation of a vaccine, but there is no assurance that one will prove effective and safe in the next year. Lots of hope, but no guarantees.

  • The economy is opening slowly. Employment is improving, slowly. The expectation is that things will continue to open and we will “limp” towards a full recovery. But we don’t know if there will be a Round 2 of COVID or if the economy will stagnate after the initial openings.

  • There is a lot of government support, and likely to be more, which puts money into hands of investors and may influence the stock markets positively

  • There is a record amount sitting in cash currently – meaning there is a lot of money on the sidelines, and with the Fed actions we can expect more money to be available

So what investments are attractive?

  1. Some may say the stock market is expensive and has gotten ahead of itself with rosy expectations. That may be true. But maybe it continues higher, especially if a successful vaccine is developed and the economy recovers.  

  2. Bonds are also “expensive”. The 30-year treasury bond pays less than 1.5% per year (before taxes and inflation). That is awfully low to lock up your money for 30 years. The dividends on stocks are higher than bonds, and the odds that stocks are higher 30 years from today is very high.

  3. Cash is the worst. First, it pays you nothing. Second, today you are losing money on cash assets when looking at your future purchasing power factoring in inflation.  An investor who goes to cash now has to guess when to get back in (they often don’t). Cash, in my view is an emergency fund that gives you 12 to 18 months of liquidity to ride out market/economic storms. It can also be used as “dry powder” to purchase more shares “when the market dips”. 

  4. Annuities. Principle protection and some upside growth during good markets. Good ideas, but you are limited to 10% of the investment on withdrawals and have to wait the contract period. So, annuities need to be reviewed as a piece of the solution, not a stand all be all. 

  5. Options. When designed properly, options can be used to hedge market risk. This is appropriate for some highly valued assets like US equities. 

As you can see, there is not a single investment that screams “deal”.  There is a lot going on. This is a very interesting time politically, economically and socially.

In today’s environment, this is where discipline and patience become your greatest assets...Since we don't have that history book of the future.

Brock Williamson, CFP®  



© 2020 Promontory Financial Planning. The material provided is for general information, and should not be considered a solicitation for the purchase or sale of any security.

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