Financial Insights – February 15, 2021

Written by ProVise Management

On February 15, 2021

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The first look at the fourth quarter of 2020 showed Gross Domestic Product (GDP) up by 4%, which left a 3.5% decline in GDP for all of 2020. The fourth quarter was led by consumers as they spent more on services and, to a lesser extent, on goods. On the other hand, businesses were busy spending cash to purchase equipment and increasing inventories. Housing prices also continued on a tear. 2021 should produce a GDP growth of 5-5.5%, which could bring us back to pre-COVID levels by the second quarter. (Source: Kiplinger Letter)


The popularity of investing that focuses on the environmental, social and governance (ESG) impact of corporations continues to hit a fever pitch after a breakout year in 2020. There’s just one question plaguing many investors. What exactly qualifies as ESG? The truth is that all ESG is not created equal and there are several different categories. Investors must be weary of what’s known as ‘greenwashing’, whereby false impressions or misleading information about a company’s products or processes are used to portray them in an environmentally or socially friendly light. Greenwashing can sometimes go unnoticed because there are no standard ESG disclosure requirements for public companies or the asset management firms that invest in them, causing confusion for investors and corporations alike. The European Union is further along in rolling out new ESG regulations, though we believe it’s only a matter of time before standardized ESG disclosures are required in the U.S. as well.

On Thursday, March 11th at 4:30 pm EST, ProVise will host a Zoom meeting to discuss ESG and how it impacts investors and businesses. The meeting will be moderated by Ray Ferrara, CFP® and will feature Daniel Mannix, CFA® on what is (and what isn’t) ESG investing and why now is the time to seriously consider it as a viable investment approach.  To register, please click here.

Space is limited, but we will record it for those who cannot attend. If you have any questions in advance, please send an email to ferrara@provise.com.


GameStop is the world’s largest retailer of video games and gaming merchandise with over 5,500 stores. In December 2007, the stock peaked at about $62 per share before the rise of online gaming began to cast doubt on its business model. By 2018, with the stock just under $20, the company just could not find a way to make money again. That is when the short sellers jumped into the fray.

Short-sellers borrow stock from another shareholder and then sell the stock. The hope is that the stock drops in price and the short seller can buy it back at a lower price to repay the shareholder from whom they borrowed the stock. In other words, a short-seller wants the stock to decline to make money. If it goes up, the short seller loses money because they have to buy it back at a higher price than they sold it for in the first place.

With GameStop, sophisticated investors were betting big that the stock would go down further, and they sold short to the tune of 140% of the shares readily available for trading. A year ago, the stock price had declined to about $4 per share, which is where it stayed until last August when it started to increase to the low to mid-teens. On January 18th it reached about $17.50 per share and then exploded as some retail investors recognized the overselling and started buying. The more the stock went up in price the more it cost the short-sellers who were either forced to buy some of the stock with cash to cover their losses or in many cases, to sell some winners in the portfolio to raise the necessary cash. It became a vicious cycle. The more they bought, the more the stock price increased and at one point it increased 1600%, reaching $483 per share. Billions were lost by the short sellers and investors who owned the stock made billions… at least on paper. Until they sell, they have made nothing. 

There is no rational reason for a stock to do what it did, but it did. It is all likely to end badly as those that own it continues to watch their profits disappear. As of this writing, GameStop is trading at just under $50 per share.


Over the past 20 years and three presidents, the national debt has increased dramatically. Under George W. Bush it increased 86% over his eight years topping out at $10.63 trillion. He dealt with the dot-com bust and the war on terror. During Barack Obama’s eight years as president, the national debt increased by 88% as he dealt with the financial crisis. When he left office, it stood at $19.95 trillion. Not to be outdone, and in large measure because of the COVID-19 crisis, the debt increased by 39% over Trump’s four years to $27.75 trillion.

During Bush’s tenure, which ended amidst the financial crisis, the S&P 500 declined 40%. Obama’s eight years produced a total return of 182%, while over Trump’s four years, the S&P 500 gained 83%. (Source: US Treasury, Forbes and BTN Research)


Somehow the new year brings resolutions of losing weight, lowering debt, spending less, saving more, getting in shape, etc.  Of course, people can make resolutions whenever they want, so it isn’t too late. But somehow these resolutions don’t seem to stick very long no matter when they are made. In fact, most people break their New Year’s resolutions by the middle of January and 80% have gone by the wayside by the middle of February. Here is a little trick that help you keep a resolution. Turn the resolution into a specific goal to be accomplished within a stated time period. Make sure it is achievable. Here is an example.  Instead of saying, “I will save more money this year”, say instead “I will save $2,600 this year by saving $100 from each of my paychecks”. Once you achieve a goal, it is okay for you to reward yourself.


The greatest loss from COVID-19 is, of course, the loss of life. In the U.S., we have already lost over 470,000 and worldwide 2.3 million have passed. The stress associated with this disease has also taken an additional toll that is not really being tracked. And finally, there was the economic cost that at one point caused about 20 million Americans their jobs and there are still about 10 million today who have not been re-employed. Before it was the worldwide pandemic that it has become, it was estimated that it would cause major economies to decline in GDP terms 2.4-3.0% (Source: statista.com). In fact, GDP declined by 2.3% in the US or about $500 billion. Last fall, the International Monetary Fund estimated that worldwide it would cost $28 trillion. We are still counting.


Some people like to have an early indicator for the market’s performance and there are three that many people watch. First, does the market go up or down in the first five trading days of the year. If up during those days, it historically has been higher at the end of the year by an average of 13% according to Stock Trader’s Almanac. We can check this as we were up during the first five days of trading. Next, what about the January affect? Is the market up or down?  Well, it was up this year, which many say portends an up year for the markets, so check it off. Then there is the Super Bowl theory that states that when a team from the National Football Conference or a team from the former National Football League wins, it is an up year for the markets. Check that one too, since the Tampa Bay Bucs beat the Kansas City Chiefs.


A 2020 Advisor Authority study sponsored by Nationwide confirmed that women continue to worry about the negative impact COVID-19 has had on their long-term financial picture and retirement planning. As we have noted before, women are at greater risk of not achieving a financially secure retirement than men given the persistence of the gender pay gap, time out of the workforce for parenting and caregiving, as well as longer life expectancies that could bring increased health care costs.

In this study, women noted some of the following financial concerns over the next 12 months: 1) portfolio losses related to COVID-19, 2) protecting assets and 3) health care costs. With 72% of the surveyed women saying that the pandemic has had a negative impact on how long they could live off their retirement savings, we have seen increased questions from women about the timing of their retirement as well as whether they will need to change their lifestyle. 

As Ann Bair, Senior Vice President of Marketing for Nationwide Financial stated “While women are acutely aware of the challenges they face, it is critical that they take steps now to address the gaps in their retirement plan, especially as we start a new year.” We wholeheartedly agree with Ms. Bair. Could we help you navigate the complicated issues surrounding your vision of retirement?