I started the first draft of this edition of Exencial Views on Veteran’s Day.  A day that we should all be thankful for and inspired by.  Thank you, Veterans, for your sacrifice and devotion to duty and country.

My plan is to send this out a few days before Thanksgiving, to share all that I am thankful for, before being consumed with football and overeating.  So here goes –    

I am thankful for my amazing friends who have supported me over the years, who have tolerated my faults, encouraged my dreams, and laughed with me during this journey toward old age.

I am thankful for my family, for the unconditional love they share so freely.

I am thankful for my spiritual warriors who pray for me and with me, and for the hope they give to even the darkest moments we face.

I am thankful for the words of John F. Kennedy, “that one man can make a difference, and every man should try.”

And for the words from John Wooden, “It is amazing what a team can accomplish when no one cares who gets the credit.”

And from Abraham Lincoln, “I like to see a man proud of the place in which he lives.  I like to see a man live so that his place will be proud of him.”

It is good for the soul to reflect upon that which we are thankful.  It is also good for the soul to be inspired and to offer inspiration to others.

It is good for the soul to serve somebody, to offer a word of encouragement at just the right time.  To believe in people when they doubt themselves. 

Of all this, I am thankful.

With the election virtually over, and vaccines seemingly on the way, it seems appropriate at this time, to look ahead and perhaps make a list of things I hope we can all be thankful for one year from today.  So here goes –

On Thanksgiving Day, 2021, I hope we are all thankful that we have put our masks away.  That we can once again shake hands and hug each other.  I don’t know about you, but there are days I really need a hug.

I hope we can be thankful that with new leadership, our political process has become more effective and less polarized.

From a market perspective, hope really isn’t part of the equation.  Let me try to explain.  As most investors know, the stock market is a discounting mechanism.  It looks ahead, driven by future expectations for earnings, cash flow, and valuation drivers like interest rates and inflation.  As reality exceeds or falls short of these expectations, stock prices move accordingly.  The never-ending comparison of expectations to eventual reality is what drives stock prices.  While hope might be a good thing, as Andy Dufresne explained in The Shawshank Redemption, it can be dangerous when it comes to predicting future stock prices.  Essentially, analysts and portfolio managers must separate what they hope will happen from what they think will happen.  In short, removing emotion from the process is critical to long-term investment success.  No small task, especially in today’s environment.

Here are three positive developments that should unfold as we move into the New Year –

  1. At least one effective vaccine will arrive sometime in the first half of 2021.  By the end of 2021, Covid-19 will still be around, but we will be well on our way toward defeating it.
  2. Corporate earnings will accelerate in 2021 as the economy continues to recover.    
  3. Political vitriol will reside as divided government and legislative gridlock settles in.

As in most years, unpredictable events will occur.  Some will be positive, some not so.  As an investment team, we will remain vigilant in our disciplined, analytical process.  Searching for opportunities, adapting to changes, avoiding emotional extremes as best we can.  All while remaining thankful for the many blessings we receive each day.     

Michael Kayes, CFA

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