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Jay Peroni CFP®


Senior Portfolio Manager L 4 • Ambassador Advisors


incoln Logs were one of my favorite toys as a child. I would use these durable, square-notched miniature logs to


build incredible structures: small forts, towering buildings, and, of course, my future dream home: a log cabin. One of the great things about


Lincoln Logs is they force you to be creative.


In 2020, investors also had to be creative. Tis year’s stock market was kind of like my first set of Lincoln Logs: whatever I built would always seem to fall apart, and all the logs tumbled. In the U.S., we witnessed a lightning-speed bear market in February and March, as the COVID-19 pandemic spread across the world, followed by a global economic shutdown. Trough the rubble, U.S. stocks were durable and resilient in a crisis-driven year, exceeding all expectations.


Yet a great house always has a solid foundation. We are reminded of this in Matthew: “Everyone therefore who hears these words of mine, and does them, I will liken him to a wise man, who built his house on a rock. Te rain came down, the floods came, and the winds blew, and beat on that house; and it didn’t fall, for it was founded on the rock. Everyone who hears these words of mine, and doesn’t do them will be like a foolish man, who built his house on the sand. Te rain came down, the floods came, and the winds blew, and beat on that house; and it fell—and great was its fall.” (Matthew 7:24–27)


Our “proud to own” investment process is built on a solid foundation of finding great companies that exemplify biblical values, while also favoring companies with strong earnings


and sales. Tis process led us to some of the most profitable companies despite the global economic shutdown, and this helped cushion the market decline, while also helping us to be well-positioned for the subsequent market rally.


Once all the logs tumbled in the stock market, it was time to begin rebuilding, and that was exactly what the financial markets began to do in April, May, and June. Our creativity paid off, as our portfolios quickly rallied back. We witnessed a record-setting rally, as stocks quickly rebounded and reached new highs by late summer. While the stock market was soaring, however, the U.S economy was still reeling.


In 2021, we expect the economic rebuilding process to continue. It often takes 18-24 months for an economy to recover from a recession we expect to last until early 2022. Just like an impressive Lincoln Log structure, after it has been knocked down, the economy also takes time to build back up and get back on track.


We are expecting modest gains for the stock market in 2021 with a 3,600-3,850 target for the S&P 500. Te average S&P 500 earnings forecast was $128 for 2020, and we see the potential for a 25% increase in 2021 to $160. As we begin to recover from COVID -19 and as the global economy continues to reopen, we expect corporate earnings to continue steadily climbing.


In mid-2019, the Federal Reserve Bank (the Fed) started to ease interest rates, but after COVID-19 swept across the U.S. in March, it dropped its federal-funds target rate near zero percent. Tese ultra-low interest rates should continue to favor the stock market, as income investors are forced into the stocks to try to grow their portfolios.


We still favor companies in sectors less impacted by the E


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