Equity markets ended 2020 strongly despite global health concerns, a pandemic fueled recession and domestic elections marred by a violent transition. Despite the disconnect between economic indicators and capital markets, we successfully navigated market trends and capitalized on the post March selloff rebound. Our core belief in rebalancing, critical thinking and research led us to overweight Technology, Communications and Healthcare sectors after the first quarter decline.

We begin 2021 with a White House committed to enhanced vaccine production, distribution and additional stimulus to bridge the still growing economic gap posed by unemployed and underemployed workers. Although the equity markets continue to gain during early 2021, we continue to scrutinize our portfolio models to accommodate shifting themes and portfolio weightings. Long term, our goal is to provide stable returns through broad global diversification. Note that our risk profile did not change significantly last Spring; when we selectively added to non-fixed income sectors.

Market uncertainty is a certainty; we take this opportunity to discuss themes that we feel may dominate 2021’s investment climate.

Momentum, “growth equities” and low interest rates defined 2020 and drove the rebound in global capital markets. Certain momentum growth equites experienced triple digit gains – so much for “once in a hundred-year” results. Our fundamental analysis indicates that many companies are overvalued. For example, the euphoria experienced in non-fossil fuel transportation, cannabis and crypto-currency sectors have a tulip bulb bubble quality about them. Clearly, we believe there is a difference between life changing innovation and the price to invest in these trends.

Early 2021 portfolio rebalancing has focused on trimming exposure to domestic growth momentum and shifting toward global markets – specifically emerging markets; and modestly overweighting US value equities. US Dollar weakness and domestic equity outperformance portends for an increased exposure to international investments. We hope this will blunt the impact of any significant domestic correction and provide an inflation hedge if the dollar weakness continues. Shifting towards value – to take advantage of successful vaccine programs and additional stimulus resulting in a broader global economic recovery. Note that financial services tend to be the largest sector weightings in value indices and are poised to benefit from the recovery and higher interest rates. Technical analyses of the largest value/growth underperformance in history provides additional support for a reversionary correction toward value.

For 2021, it is important to consider the potential impact of rising interest rates on the economy and specific sectors dependent on cheap capital. The Biden stimulus plan is but one piece of a global monetary mosaic supporting the long-term trend towards higher interest rates. A vaccine program that results in a healthy and intentionally mobile work force, massive global stimulus and accommodative monetary policy should increase economic growth, inflation and therefore interest rates.

Rising interest rates is a key risk for long-term bond holders. One way to view this risk is by Duration – loosely defined as the way a bond’s price will change in response to changes in interest rates. Hopes for an effective vaccine program, pent up demand for durables (never thought a Home Depot rep would look me in the eye and quip “sorry we have no stoves”) and revitalized discretionary spending may provide the inflationary spike required to lift the long end of the yield curve. However, the fed has a very heavy thumb – at best we anticipate baby steps to purchase longer term securities.

We interpret the steepening yield curve and rising rate environment as a healthy adjustment and necessary as the economy recovers and normalizes. A rebounding global economy coinciding with interest rates close to zero invites inflation, which negatively impacts long-duration investment performance. To summarize, we continue to favor shorter term fixed income vehicles, but hope to take advantage of inflationary pressures and a steepening yield curve if and when returns revert closer to historic norms.

The pandemic has been devastating to parts of the real estate market. Traditional brick and mortar stores and office space, represent a large percentage of this sector. The pandemic has realigned (perhaps permanently) the office space requirements for a typical business. Working from home may become the new normal for many people. We believe that real estate opportunities should focus on international logistic centers, supply chain and data/communication centers. The weakening dollar, has made investments in foreign real estate more attractive; foreign REITs are represented within our diversified portfolio.

Part of 2020’s success and continued optimism for 2021 hinges on alternatives, specifically precious metals. Gold and silver traditionally provide a hedge against an equity correction and inflation. We are considering cryptocurrencies and their attendant technology to further protect our investors from market volatility. We are also maintaining slightly higher than normal cash positions to dampen volatility.

5C continues to encourage broad diversification and targeted portfolio rebalancing to maintain exposure to sector allocations, cushion against volatility and outsized corrections, while maintaining your long-term strategy.

We appreciate your trust and confidence in our management. Please do not hesitate to contact us to discuss your portfolio discuss changes and updates on your financial situation.




Michael R. Sanders

Principal, Chief Investment Officer





Craig R. Marson, JD, CPA

Principal, Director of Financial Planning