Making sense of the markets this week: December 21
One word of caution is that there is the risk of highly ranked active funds not repeating their success over time. Some actively managed mutual funds have a habit of slipping out of their top rankings. Fund management relies on extensive analysis and personal judgement, and the active managers’ luck or skill may run out. Also, active funds can change managers, meaning that the manager with the impressive record is no longer running that fund. To help address that risk, you might look for active funds with a long track record of success that includes managers with an extended tenure.
Or, go the passive investing route and remove the “active risks.” As this MoneySense post from Bryan Borzykowski suggests, cheap, diversified ETFs might be the way to go for most investors. (Check out the Best ETFs in Canada for 2020.)
Stock market battles two forces
This week, the fear of rising COVID infections fights the optimism over stimulus hopes and vaccine distribution in the U.S. New daily COVID-19 cases continue to surge in the U.S. and Canada. But once again, optimism is winning the day—er, make that week. From Reuters…
“Wall Street showed signs of a Santa rally on Tuesday, with the Nasdaq closing at a record high, helped by optimism about a potential government stimulus to protect the economy from the coronavirus pandemic.”
Meanwhile, Apple sent a positive sign with reports of ramped up iPhone production needs for 2021. From that Reuters post …
“Apple Inc was the top boost to all three U.S. benchmarks, surging 5% to its highest since September after a report said it plans to increase iPhone production by 30% in the first half of 2021.”
And the tech-heavy Nasdaq 100 index is battling through that wall of worry as it moved to a new record. As we noted last week, it appears you just can’t keep a good index down.
On the global front, we await the outcome of Brexit negotiations, which appear to be moving in the right direction. Christopher Bennett of SP Global, who is stationed in London, England, sent this to me via email…