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2020 Year in Review January 13, 2021
Downloads: 2020-Year-in-Review.pdf

2020: The Year in Review

Every January, it’s customary to look back at the year that was. What were the highlights? What were the lowlights? What events will we always remember? Most importantly, what did we learn?

Here’s the problem, though: How in the world do you recap a year like 2020? You could write a book about March alone. So, we thought for a long while about everything that happened last year and decided to focus on three important lessons that we as investors can learn from 2020.

The first lesson has to do with…

The Markets. When word began leaking out about a new viral epidemic in China, the markets didn’t really know how to react. Would this go away in a few weeks and be nothing more than a footnote in history? Or would it be like the SARS epidemic of 2002 – terrible, but largely restricted to China? Or would it progress into a full-blown pandemic?

Obviously, we know the answer now. But we didn’t back then.

There’s a well-known saying about collapses and crashes: They happen slowly, then all at once. That’s sort of what the markets experienced in those turbulent few months between January and April. There was some volatility near the end of January, but nothing major. Toward the end of February, as the virus began affecting global supply chains, the volatility got worse. But for all the bad days in the markets, there were plenty of good days, too.

Then came March.

As the virus spread to our shores, as the World Health Organization declared a pandemic, as local governments instituted lockdowns and other restrictions, investors realized several things:
• Lots of people were going to get sick, or even die.
• Many more would lose their jobs.
• The economy was going to fall into a recession.

With startling speed, what had been happening slowly suddenly seemed to happen all at once: The markets crashed. From February 19 to March 23, the S&P 500 fell almost 35%.1 On more than one occasion, trading at the New York Stock Exchange was automatically halted because prices were plummeting so fast. For most investors, it was like nothing they’d ever experienced before. Understandably, fear was rampant.

But not, we’re grateful to say, at Hudock Capital Group.

When speaking on the phone with our clients, our team did our best to emphasize a very important point: While COVID-19 was new and scary, what the markets were doing was actually old and familiar. It’s a classic tale: Something unexpected happens, and the markets panic. We saw it in 2008, during the financial crisis. We saw it in 2001, after September 11. We saw it in 2000, after the dot-com bubble burst. The cause is always different, but the effect is always the same.

When 2020 began, no one could have predicted the pandemic, least of all us. But that something, sometime, would bring the markets down – that was inevitable. That’s why we had already factored that inevitability into our strategy and prepared for how to handle it.

Then, too, we knew that historically, epidemics tend to cause sharp downturns followed by equally sharp recoveries.2 So, our message to clients was simple: All that market madness didn’t mean we should deviate from our existing strategy. Quite the contrary! It meant we should hew to it more closely than ever.

Well, you remember what happened next: The markets recovered, and quickly. Between March 23 and April 14, the S&P 500 rose 27%.1 Before much longer, the markets had regained almost everything they had lost. And while there were further spasms of volatility later in the year, by the end of 2020, the markets had risen to new highs.

That’s why Lesson #1 is simple:

1. No matter what the markets are doing, nothing should ever make us choose panic over our strategy.

To understand the second lesson, let’s first understand something about…

The Economy. As we moved into the summer, many clients asked me the same question: “The markets are up, but the economy is still very, very down. What gives? Should we get out of the markets again?”

It’s a terrific question. Here was our answer:

The markets and the economy are not the same thing. They’re related, but different — and they don’t always move in concert with each other. The economy moves based on activity, like production, consumption, and trade. The markets, on the other hand, move largely on anticipation. When investors expect something will happen, they make decisions based on that expectation. So, when the markets plummeted in February and March, it was based on the expectation that unemployment would rise, consumer spending would fall, and the economy would contract.

All those things happened. But here’s the thing: once they happened, they were already “priced in” to the markets. So, in April, May, and beyond, the markets were no longer reacting to the idea of a recession. We were already in a recession! Instead, they were reacting to what analysts anticipated would happen in the future: an economic recovery. Specifically, that government stimulus would help, more government stimulus would arrive, and the pandemic would end. Some of those things happened, and some didn’t, but as always, the markets moved ahead of the economy.

All most people saw, though, was a series of unrelentingly negative headlines. That’s why many investors ended up sitting on the sidelines as the markets rebounded. After all, no one buys sunscreen when it’s raining. Sadly, too many investors missed out, just as they often do whenever the news seems bleak. (And of course, the opposite is also true: Too many people rush to invest just because the news is good, even if what they’re buying doesn’t make sense.) The problem was repeated in the fall when too many investors made decisions because of who won the election, or who lost, even as the markets continued to climb.

You can probably guess Lesson #2:

2. The markets and the economy are not the same. That’s one reason we should never make investment decisions based on headlines!

Finally, let’s talk a little bit about the most important thing that happened in 2020. We’re referring, of course, to:

The Coronavirus.

The next few paragraphs are not coming from us, the financial advisor. They’re coming from us, as people.

There’s no getting around it, 2020 was a hard year. Everyone, we think, suffered in some way. Some people suffered because they lost their job, saw their pay reduced, or their hours cut back. Others suffered because they felt isolated, or lonely. And of course, so many people suffered due to the virus itself – either because they caught it, or because someone they loved did.

This pandemic has tried our souls in so many ways. And while we sincerely believe there is a light at the end of the tunnel, this year will come with its own challenges. But there’s a final lesson that
2020 taught us. A lesson that will get us through the months ahead.

3. There is nothing we can’t adapt to. There is nothing we can’t overcome. There is nothing we can’t do.

That’s what 2020 taught us: That we are stronger than we knew. The universe threw a pandemic, a market crash, a recession, and an election at us in 2020, and we got through it. Maybe the year left scars, but it also left us stronger. So whatever 2021 hurls our way, we can take it. Economic uncertainty? Seen it, dealt with it. Market volatility? Been there, done that. We’re not saying it will be easy. But doable? You bet.

As we progress further into the New Year, we hope you will remember these lessons. It may sound corny, but we earnestly hope you keep them in your heart. They will help you weather the trials to come. They will help you work toward your financial goals.

One more thing to remember: Our team will always be there for you. If you have questions, we want to answer them. If you have concerns, we want to address them. If you have dreams, we want to help you achieve them. We look forward to serving you this year, and for many years to come.

Happy New Year! Let’s make it a great one!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

1 “S&P 500 Historical Prices,” The Wall Street Journal,  https://www.wsj.com/market-data/quotes/index/SPX/historical-prices

2 “How the market has performed during past viral outbreaks ,” MarketWatch, https://www.marketwatch.com/story/heres-how-the-stock-market- has-performed-during-past-viral-outbreaks-as-chinas-coronavirus-spreads-2020-01-22

Riverfront January 11, 2021
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Quarterly Review: 2020 Ends Positive on A Positive Note

Written by RiverFront Investment Group.  Reprinted with permission from RiverFront Investment Group.  Redistribution is prohibited.

Riverfront January 4, 2021
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Structural and Cyclical Forces to Keep Inflation in Check

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Santa Really Does Exist… December 21, 2020
Downloads: Santa-really-does-exist.pdf

Santa exists.  We can prove it.

We know you probably stopped believing in Santa Claus a long time ago.  So did we.  And not just Santa, but Rudolph, the elves, the workshop, all of it.  We accepted the fact that it was only a story for young children.  In short, we grew up.

But we were wrong.

***

On a winter’s night in 1971, a man named Larry Stewart stopped at a diner in the town of Houston, Mississippi.1  Out of a job and out of money, he hadn’t eaten in almost two days.  But he went into the diner anyway, ordering a meal before pretending to lose his wallet.

The owner of the diner came over and picked up a $20 bill off the floor.  “Son, you must have dropped this,” he said.  Thinking it was a miracle, Stewart took the money, paid his bill, and left.

Only afterwards did he realize the truth: the owner hadn’t picked up the money from the ground. He’d given it directly to Stewart, in a way that wouldn’t embarrass him.  From then on, Stewart vowed he would help others the way the owner had helped him … if only he got the chance.

Nine years later saw Stewart in the town of Independence, Missouri.  Once again out of a job (a company he’d started had recently gone under), he stopped at a drive-in to get some food.  Seeing that one of the carhops was cold, overworked, and probably underpaid, Stewart gave her a $20 bill.  “Keep the change,” he said.

“You’re kidding,” she replied in disbelief.

“No ma’am, Merry Christmas.”

“Sir,” she said, crying, “you have no idea what this means to me.”

But Stewart did.  He remembered his own gift nearly a decade earlier, and his promise.  He could have stopped there, but “paying it forward” felt so good that he kept doing it.  For over twenty years he gave money to the cold, the hungry, and the needy, especially around Christmas time.  While he didn’t have a beard, reindeer, or a sleigh, he would sometimes dress up in red.  In and around Kansas City he made his rounds, giving $20 here, $100 there, even $1,000 if someone really needed it.  Most of the money was given to people he met on the street, or in bus stations,

or at the Laundromat; anyone who looked in need.  Race made no difference, nor age, nor anything else.  For him, charity is for all who are suffering.

Eventually, word got around.  Santa Claus was in Kansas City.  A Secret Santa, but Santa nonetheless.  No one knew who he was, for he never told anyone his name.

After starting another, more successful business, Stewart began helping people in other places.  He went to New York after 9/11.  New Orleans after Katrina.  Washington, Chicago, California.  Remember, Santa can go everywhere.  Maybe he couldn’t travel the world in a single night … but wherever he was, there was always someone who needed him.

In 1999, Stewart tracked down the owner of the diner.  He gave him $10,000.

In 2006, Stewart finally revealed who he was. 2 He passed away a year later, but his legacy continues through the work of other Secret Santas all over the world.3 So that got us thinking: How can we say Santa doesn’t exist?  Why does he only have to be a myth?  Is he not simply someone who gives gifts out of kindness?  Maybe the Santa we believed in as a kid isn’t real, but the truth is much better anyway: there is no one Santa, but a hundred Santas, or a thousand.  The number doesn’t have to end.  Anyone can be Santa.  Every time we help someone in need, we’re Santa.  Every time we make Christmas about giving more than getting, we’re Santa, too.

We think that’s the secret.  Maybe the original Santa, if there ever was one, got old and had to retire.  But his final gift was to ensure that someone, somewhere, would always be there to carry on his name, someone like Larry Stewart.

This Christmas, we hope we can all take a moment to spread joy to someone who really needs it.  Maybe it’s a neighbor, or a co-worker, or just someone we meet on the street.  But whoever it is, remember . . .

Santa exists.  And he could be you.

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

P.S.  From all of us here at Hudock Capital Group, Merry Christmas!

1 Nancy Hellmich, “Santa shares his secret,” USA Today, December 21, 2006.  http://usatoday30.usatoday.com/news/nation/2006-12-20-santa-secret_x.htm

2 Associated Press, “Illness unmasks generous ‘Secret Santa.’” MSNBC, November 15, 2006.  http://www.msnbc.msn.com/id/15751409/

3 “Society of Secret Santas,” Secret Santa World, accessed November 28, 2012, http://secretsantaworld.net/

Riverfront December 21, 2020
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2021 Outlook Summary: Out of the Darkness

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Riverfront December 14, 2020
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The Growth versus Value Debate

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Riverfront December 7, 2020
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How to Pick ETFs and the Games We Play

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Riverfront November 30, 2020
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Ingenuity Over Infection

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Counting our Blessings November 25, 2020
Downloads: 2020-Thanksgiving.pdf

Every year, we expect certain things to happen around Thanksgiving.  We expect the leaves to change colors.  We expect to decorate our houses with pumpkins and cornucopias.  We expect football on television.  We expect to eat turkey and stuffing, potatoes and gravy.  We expect our family to gather from near and far.

But the coronavirus pandemic – and all of 2020, really – has turned our expectations upside down.  This year, many of us will not be able to see our parents, grandparents, or other relatives. Those who have lost their jobs may not have the means to enjoy the kind of feast we’re accustomed to.

Most of us have never experienced a Thanksgiving like this one before.  That’s because most of us have never experienced a year like this.

And yet, it’s precisely during a time like this that Thanksgiving becomes more important than ever.  Because, it’s when life takes certain things away that we realize what truly matters.  When we learn to live without certain comforts, we learn what we couldn’t live without.  We learn what we really have to be thankful for.

Let us tell you: There are so many things we are thankful for.

First and foremost, we’re thankful for our family.  Not being able to see certain loved ones as often makes us realize how much they mean to us.  This year, we have treasured every email and letter, Zoom® session and phone call, more than ever before.

Second, we’re thankful for the technology that enables us to connect with our families, even when we’re hundreds of miles apart, or simply separated due to social distancing.

Third, we’re thankful for our amazing team.  Their dedication, professionalism, and attitude inspires us every day.  When the markets were crashing, they were on the phones, working hard to reach every client we have.  When the lockdowns started, they worked from home without skipping a beat, working to take care of you even while they took care of their own families.  We do what we do because their hard work empowers us to.
Fourth, we’re thankful for life’s daily luxuries that we too often take for granted.  Can you imagine going through this pandemic the way people would have hundreds of years ago?

The pandemic has reminded us just how accustomed we are to always having food, always having water, always having power, always having shelter.  In the 21st century, we have books and games and movies to keep our minds occupied.  We have pets to keep us company.

Let’s face it, this pandemic has even reminded us how much we take toilet paper for granted. Toilet paper!

As difficult as it is to live with COVID-19, the modern world makes it easier than past generations could have imagined.  And we’re grateful for that.

Fifth, we’re thankful for the men and women striving to end this pandemic.  The doctors and nurses on the front lines, caring for the sick.  They are literally putting their lives on the line, working from sunup till sundown.  All to save lives and to reunite families.  And let’s not forget the scientists and researchers, racing against the clock to deliver the world a vaccine in record time.  We could never do what they do.  We’re so thankful they’re doing it.

Sixth, we’re thankful for the members of our community who keep our community functioning.  From teachers to police officers.  From grocery store baggers to truckers.  From utility technicians to sanitation workers.  Many are working double shifts.  Others have converted their offices into makeshift bedrooms.  Too often, their work goes unnoticed and unsung.  But they are considered essential workers for a reason – because none of us could live without them.

Finally, we’re thankful for you.  When the pandemic began, our team tried to reach as many clients as possible.  Not just to talk about your investments, but to talk about you. To see how you and your family were doing.  But very soon, we realized we didn’t have to call each of our clients.  That’s because most of our clients were calling us!  Not to ask about the markets.  Not to ask about their money.  But to ask about us.  To check in on us.  To express their appreciation for us.

There is never a day that goes by where we are not thankful for what we do – because of who we do it for.

This pandemic has changed so much.  How we live, how we celebrate.  But there are some things it hasn’t changed.  It hasn’t changed what we care about.  It hasn’t changed who we love.

It hasn’t changed how much we have to be thankful for.

On behalf of our entire team, we wish you and your family a safe and joyful holiday season.  Happy Thanksgiving!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

Riverfront November 16, 2020
Downloads: Riverfront-Nov-16-2020.pdf

Election Outcome Likely Better for Stocks than Bonds

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We Salute Our Veterans November 10, 2020
Downloads: Veterans-Day-Letter-2020.pdf

The Highest Honor

On Veteran’s Day we pay tribute to the men and women who have worn the uniform of the United States Armed Forces. We pay tribute to all levels of sacrifice—from the cook, to the soldier who gave up his/her life in defense of our freedoms. All are important to us.

As we think about the sacrifices of our armed forces we recollect the importance of the Medal of Honor and the symbolic tribute paid by the Tomb guards at the Tomb of the Unknown Soldier.

The highest military decoration awarded by the U.S. government is the Medal of Honor. It is awarded to members of the armed forces who illustrate, “conspicuous gallantry and intrepidity at the risk of his or her life above and beyond the call of duty while engaged in an action against an enemy of the United States.” (1)

One soldier who exhibited such courage was Audie Murphy who at the age of 17 enlisted in the United States Army because he wanted to make something of himself. On January 26th, 1945 the company Audie commanded came under attack by six tanks and various waves of infantry. 2nd Lt. Murphy ordered his men to withdraw to the woods, while he remained in a forward position to give fire directions to the artillery by phone.

After the enemy realized his position he climbed into a burning tank, at great peril to himself. He was exposed to gunfire from 3 sides, was alone, and in a burning tank that could blow up at any moment. He employed the .50 caliber machine gun causing the attack to waiver, and in turn pushed the enemy tanks back. The Germans continued to try for an hour to kill Audie.

During the fire fight, he received a leg wound and continued to fight until ammunition was exhausted. He then made his way back to his company, refused medical attention, and organized his company to counterattack the Germans who withdrew their forces.

His single act of courage saved his company from possible encirclement or destruction, and allowed the company to hold the woods, which was the German’s objective. (2)

By the end of World War II, he was the most decorated U.S. soldier, having earned every medal his country could give, including the Medal of Honor. If the name Audie Murphy sounds familiar, it’s because after the war he also became a famous movie actor, author, and has his name on the Hollywood Walk of Fame.

Audie’s show of gallantry was not an isolated event. The U.S. has given over 3,460 Medal of Honor awards with 19 men receiving the award twice. Fourteen of these men received two separate medals for two separate actions; five received both the Navy and the Army Medals of Honor for the same action. Over 600 received the award posthumously. The most medals earned in a single war was during the Civil War with 1,522 awarded. (3) The Medal of Honor is properly described as having been “awarded”, “earned”, or “received”, not “given” or “won.” (4)

Tomb of the Unknown Soldier

As a country, we go to great lengths to make sure that those who lived and served, and those who died while serving are remembered and honored. At the Tomb of the Unknown Soldier the Tomb Guard symbolically gives another one of the highest military honors, but to the “Unknown Soldiers.” During a Tomb Guard’s watch, the soldier marches 21 steps down the black mat, turns, faces east for 21 seconds, and turns, faces north for 21 seconds, then takes 21 steps down the mat and repeats the process. Twenty-one was chosen because it symbolizes the 21-gun salute. (5)

During Hurricane Isabel in 2003, with winds that turned over vehicles, downed trees, and turned debris into projectiles the Regimental Commander of the U.S. infantry sent word to the nighttime Tomb Guards to secure post and seek shelter. They disobeyed the order. Their important watch continued as normal. Soaked to the skin, marching in the pelting rain, they said that guarding the Tomb was not just an assignment; it was the highest honor that can be afforded to a service person. The tomb has been patrolled continuously, 24/7, since 1930. (6)

The Medal of Honor award winners, and the Tomb of the Unknown Soldier represent the deep gratitude our country feels about our military service members willing to give his/her life. But, even these significant acts of gallantry don’t dampen the gratitude we have for all our military personnel willing to serve their country. Happy Veteran’s Day!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

(1) http://en.wikipedia.org/wiki/Congressional_Medal_of_Honor

(2) http://www.cmohs.org/recipient-detail/2907/murphy-audie-l.php

(3) http://www.history.army.mil/html/moh/mohstats.html

(4) http://www.segtours.com/blog/archives/347

(5) http://www.arlingtoncemetery.mil/ceremonies/sentinelsotu.html

(6) http://www.freerepublic.com/focus/f-vetscor/1126293/posts

Riverfront November 9, 2020
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Our Three Tactical Rules Suggest Staying Overweight Stocks

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