Real Impact, Real Returns ^SM

Stock indices grinded higher in the 2nd quarter, although the most speculative corners of the market have come under pressure since early June. In the crypto world, Ethereum was flat during the quarter, bitcoin was off 40% and the basket of 37 meme stocks tracked by Goldman Sachs has recently entered bear market territory, having given back more than 20% since peaking in June. The retracement in these speculative assets is not necessarily a cause for immediate concern, however. I believe that a strong economy supported by pent up consumer demand and fiscal & monetary stimulus, lowers the chance of contagion, though it bears watching.

ESG investing is all the rage these days. That is, investing that includes the non-traditional environmental, social, and governance factors in the investment process. Its appeal to the broader investment industry is twofold: 1) The writing is on the wall: as wealth is passed down to younger generations who in the aggregate care more about values alignment, the asset management industry does not want to lose the assets and the fees they generate. 2) Thematic investing is popular and ESG is one of the hottest themes. Wall Street is not going to miss out. Much like crypto is too good to pass up.

When we started the year, I was optimistic about the post-pandemic world that was, and is, still some ways off; a sentiment I shared with many. That optimism does not seem to have been misplaced thus far. Vaccination rates have far exceeded early predictions and herd immunity in the United States is a mere 3months off, according to Bloomberg’s Vaccine Tracker. At the same time, we should bear in mind that many countries, including India and Brazil, are far from out of the woods and 2021 might well end up being deadlier than 2020was, from a global perspective.

I feel optimistic about the future. To be sure, that is no reflection of what is today, but of what is possible. Almost every holiday card I received, hit 2020 with the door on the way out. Although the personal and collective tragedies of this past year will not soon recede from memory, hopeful seeds are sprouting.

2020 will come to an end, that is one of the few certainties we have as we are nearing the election and a fall wave of the pandemic appears to be materializing. For many folks I speak to – and I share their sentiment – this year will not be missed. So, what of the election? What is an investor to do? Though a fair question, I cannot really line up behind a better strategy than to not do much or nothing at all. Whatever action one takes, has an unpredictable outcome, so could potentially do more harm than good.

Three months have passed since our last newsletter and the Coronavirus is still with us. For better or worse, people have adapted somewhat to the new reality. It does not make it less tragic, but a perennial state of crisis is not a preferred way to live. It is also quite remarkable how adaptable people are, giving credence to the expression “necessity is the mother of invention.” Folks have taken to working from home, moving professional and social lives to a virtual setting, and figuring out how to navigate the six feet exclusionary zone, for the most part. This adaptive coping is not entirely unrelated to the relentless recovery in the stock market. Be that as it may, it still begs the question: why is the stock market going up when the economy is going down? If you haven't seen that headline before, you read it here first. It is always possible to create a narrative to explain what happens in the stock market, after the fact.