Winter Quarterly Commentary

“For a time, while confidence lasted, an impetus was given to trade which could not fail to be beneficial... The looms of the country worked with unusual activity to supply rich laces, silks, broad-cloth, and velvets, which being paid for in abundant paper, increased in price four-fold. Provisions shared the general advance. Bread, meat, and vegetables were sold at prices greater than had ever before been known; while the wages of labour rose in exactly the same proportion. The artisan who formerly gained fifteen sous per diem now gained sixty. New houses were built in every direction; an illusory prosperity shone over the land, and so dazzled the eyes of the whole nation, that none could see the dark cloud on the horizon announcing the storm that was too rapidly approaching.”

Charles Mackay (1814 – 1889)
English poet and author
Excerpt describing the Mississippi Scheme
Memoirs of Extraordinary Popular Delusions and the Madness of Crowds

The forceful rise of the markets from March depths continued in the fourth quarter. After stalling out in early Fall, market participants floored the accelerator in November with vaccine approval in tow and the election overhang in the rearview. November finished among the top ten all-time best months for the stock market. From the March lows, the S&P 500 Index of large company stocks, the Russell 2000 Index of small company stocks, and the tech-heavy Nasdaq Composite were up 71%, 94%, and 104%, respectively. Average yields on high yield bonds exceeded 11.0% in March. Today they are sub-4.5%, a new all-time low.1

And yet, here in January of 2021, the world finds itself in a dramatic and deadly race against time and the novel coronavirus. The CDC reports the U.S. is on track for 400,000 more deaths in 2020 than the 2.8 million experienced in each of 2017, 2018, and 20192. This sobering figure is more than a statistic; it represents the loss of friends and family members. And we are not out of the woods yet. Studies indicate at least three to four times more people would need to catch the virus before it would burn itself out naturally. Coupled with exploding case counts and overburdened healthcare systems, this makes for some dark math.

On the positive side, the impressively effective Pfizer and Moderna vaccines have been approved and are (slowly3) being administered. More help is on the way: approval for the Oxford vaccine is on the doorstep and the much-easier-to-administer Johnson & Johnson version awaits anticipated study results this month, with approval hopefully following the next.