Wealth manager Steve Davis can attest that 2020 was a year unlike any other.
At his office of UBS Financial Services in Westlake Village, Davis, who has worked in wealth management for nearly three decades, told the Business Journal that while he normally does not receive many incoming calls, once the economy plummeted in March following the coronavirus outbreak in the U.S., he suddenly found himself fielding more than 150 phone calls within two days after Los Angeles and New York City closed down.
However, Davis would not call such panic calls irrational.
“It was more rational than irrational,” he said. “If you had said to me that L.A. and N.Y. were going to close, it was a rational response to say, ‘Are we going to be OK?’” Davis said that the pandemic-incurred panic was very different than the hysteria which unfolded in the aftermath of the events of Sept. 11, 2001.
“The 9/11 panic had a week where the market was closed,” Davis recalled. “During this period (in March), the market was open, but the market was falling thousands of points and (clients) were watching this on TV.” While the common train of thought would be to hold steady and not sell during such an extreme negative shock to the stock market, another line of thinking might be to take advantage of the lowered stock prices.
“I only had a few clients who wanted to buy in,” Davis said. “If I allowed them to sell, they would have sold.” Davis calmed through “a lot more discussion of the granular parts of the portfolios and how they work.” With 15 percent of the U.S. population owning 90 percent of the market, Davis said investing tends to skew to sectors such as technology and health care, where demand is insatiable.
“From April all the way to October, the markets went up every month,” Davis said, “(But) every month was uncomfortable.” He said that the stabilizing force came with the Federal Reserve’s lowering of interest rates to zero and its backstop tactics of flooding the market with dollars and offering municipal bonds.
“If you just focused on COVID and the election, you’d never be comfortable,” he added.
Looking back, Davis said that he has worked harder in 2020 than in any other year, and he is proud of what he and his team have accomplished.
“Clients saw tremendous value in that I was there for them, their family and their financial side,” Davis said. “I enjoy what I do for my career and I help people out creatively.”Stock market disconnectLooking forward to 2021, Davis explained, “Over the next number of months, people want to see the economy improve.” He added that Inauguration Day may not be a determinant of market calm or movement.
“I don’t think elections are typically the reason why markets do well or don’t do well,” Davis said, although the market will eventually react to President-Elect Joe Biden’s tax policies play out. If there’ll be an increase of corporate taxes and a taxing of the affluent and if government involvement increases, this could create market volatility. The months ahead will tell if more corporate tax rates, state tax laws and regulation unfold.
However, such forward movement as the federal $900 billion stimulus package and the distribution of vaccines should help, he said.
“You need to start seeing consumer confidence coming back,” he explained.
Only another “black swan” event, as the COVID-19 proved to be in 2020, might upend a rebuilding of the economy in 2021.
“Any type of tail risk will play a bigger role because of the national debt that we have and how much we owe,” Davis said.For the broader economy, employment and debt incurred during the pandemic period will loom large, according to Davis.“I feel worse for a lot of jobs lost and those jobs aren’t coming back,” he said. “There is a big disconnect between the stock market and the economy and we’re trying to get at to what’s happening there.” The year 2020 also marked a mini-movement of California-based companies moving elsewhere. However, according to Davis, the recent flight from the Golden State by such companies as CBRE Group, Tesla and Oracle to Texas hasn’t registered as a major uprising against an overzealous state government.
“Even as tax rates keep going up in California,” Davis said, “as many companies that we’ve been losing, we’ve been gaining. I haven’t had many clients move yet.
… California is doing well with more IPOs and new companies coming in. I’m an optimistic person at heart. For right now, new companies are making up for the ones that leave.
– Michael Aushenker
Flood of Phone Calls Followed by Gains
