2021 Annual Client Letter

We have been looking forward to writing this letter for the new year for eight months. This year, we became experts at ordering food delivery, proficient at Zoom/Teams/Facetime and learned how fashionable face coverings could be. We learned new words and phrases, including social distancing, super-spreader event, "quarantini," as well as the concept of supply and demand better than ever thanks to toilet paper.

Too many of us learned about loss in profoundly painful ways: loss of livelihood, of lifestyle and of loved ones. We all learned how painful life can be without freedom and without the presence of our friends and family. It has been a very long year indeed, one that we would sooner, but probably will never forget.

Oh, and we also had an election.

After such a year, Lindsey Hansen, Frank Hujsa and Tom Udovich wish to thank you for placing your trust in us. We are here to help you and your family preserve and grow wealth as well as achieve your most cherished goals every year, but especially in difficult times.

With the benefit of nearly two years (!) since becoming independent and affiliating with Raymond James, we can unequivocally say that we could not be happier with our decision. Efficient technology and responsive resources made it possible for us to remain in touch with our clients and to manage financial plans with almost no disruption or delays.

It was within the wild times of April 2020 that the Acadium Team and our clients won the lottery when Heather Gibson joined us as our Client Services Coordinator. Many of you have had the opportunity to interact with Heather already and she is as good as she sounds. Heather quickly learned the ropes and has enhanced almost every aspect of Acadium. We are deeply grateful that she joined our team.

You will notice Acadium's new logo at the top of this letter. Our respect for the scientific method and evidence-based investing, along with our strategic, engineering mindset led us to the new design. Like the name "Acadium" itself, the three hexagons evoke

  1. The rigorous application of an evidence-based approach to asset management, driven by academic research.
  2. The pursuit of enduring wisdom and perspective as an antidote to emotion-based errors and of superior outcomes through superior thinking.
  3. Our philosophy of managing wealth towards maximizing long-term investment returns, and most importantly, the realization of one's fullest life.

2020 In Review

Once in a while, there comes a single year in the economy and the markets that may serve as a complete tutorial for long-term and goal-oriented investors. Two thousand twenty was just such a year.

On December 31, 2020, the MSCI All Country World Index closed at 646.301. Compared to exactly one year ago, this is 14.34% higher. This is more than double the annualized performance of the same index over the past 10 years, 6.93%.

From these bare facts, one might infer that the equity market had, in 2020, quite a good year. As indeed it did. What should be instructive to the long-term investor is how it got there.

From a new all-time high on February 19, the market reacted to the onset of the greatest public health crisis in a century by going down roughly a third in five weeks. The Federal Reserve and Congress responded with massive intervention, the economy learned to work around the lockdowns—and the result was that the S&P 500 regained its February high by mid-August.

The lifetime lesson here: At their most dramatic turning points, the economy cannot be forecast, and the market cannot be timed. Instead, having a thoughtful long-term plan and sticking to it—acting as opposed to reacting, which is our investment philosophy in a nutshell—once again demonstrated its enduring value.

Two corollary lessons are worth noting in this regard: (1) The velocity and trajectory of the equity market recovery essentially mirrored the violence of the February/March decline. (2) The market went into new high ground in midsummer, even as the pandemic and its economic devastations were still raging.

Both outcomes were consistent with historical norms. "Waiting for the pullback" once a market recovery gets under way and/or waiting for the economic picture to clear before investing, turned out to be formulas for significant underperformance, as is most often the case.

The global economy—and its leading companies—continued to demonstrate their fundamental resilience through the balance of the year, such that all three American major stock indexes made multiple new highs. Even cash dividends appear on track to exceed those paid in 2019, which was the previous record year.

Meanwhile, at least two vaccines were developed and approved in record time and were going into distribution as the year ended. There seems to be good hope that the most vulnerable segments of the population could get the vaccines by spring and that everyone who wants to be vaccinated can do so by the end of the year, if not sooner.

The second great lifetime lesson of this hugely educational year had to do with the presidential election cycle. To say that it was the most hyper-partisan in living memory would not adequately express it: adherents to both candidates were genuinely convinced that the other would, if elected/reelected, precipitate the end of American democracy.

In the event, everyone who exited the market in anticipation of the election got thoroughly (and almost immediately) skunked. In November, the Dow Jones Industrial Average had gained 11.8% for the month, its best November performance since 1928 and the best overall month for the blue-chip index since January 1987.The enduring historical lesson: never get your politics mixed up with your investment policy.

Still, as we look ahead to 2021, there remains far more than enough uncertainty to go around. Is it possible that the economic recovery—and that of corporate earnings—have been largely discounted in soaring stock prices, particularly those of the largest growth companies? If so, might the coming year be a lackluster or even a somewhat declining year for the equity market, even as earnings surge?

Of course, it is possible. Now, how can we design and implement investment policy out of that possibility? Our answer: we don't, because one can't. Our strategy, as 2021 dawns, is entirely driven by the same steadfast principles as it was a year ago—and will be a year from now.

We have been assured by the Federal Reserve that it is prepared to hold interest rates near current levels until such time as the economy is functioning at something close to full capacity—perhaps as long as three more years.

For investors like us, this makes it difficult to see how we can pursue our financial planning goals entirely with fixed income investments and cash. We are reminded once again that markets create the opportunity for growth because of uncertainty, not in spite of it, and that long-term investing success comes to investors who follow a patient, disciplined and evidence-based approach. We act; we do not react. This was the most effective approach to the ups and downs of 2020 and we believe it always will be.

Looking Ahead

The resilience of capitalism has been revealed yet again. It seems obvious that the motivation for enormous profits was a major contributing factor in the American pharmaceutical industry's miracle of delivering multiple vaccines for SARS-COV-2 in less than one year.

Many industries have been forced to adapt. However, these adaptations – again, made possible by technology, the blessing of capitalism – are largely progressions of trends that were occurring prior to 2019. These trends include working from home, telemedicine, the contraction of brick-and-mortar retail, the digitization of money and extinction of physical cash and exodus from high tax/high regulation areas.

Our approach has been and remains to capture the resilience and adaptability of capitalism, companies, and consumers. We seek to benefit from the unexpected areas and times of good luck while remaining diversified and disciplined enough to insulate investors from bad luck.

Having had more time to settle into our new professional "homes" and independence in 2020, the Acadium team was able to spend more time and energy to think more deeply about who we are, what we do for our clients and how we can do it better. We are very excited to have launched an improved custom website, www.acadiumfinancial.com, in the fourth quarter of last year. It is faster to load and more complete than before as well as more relevant to our needs as educators of investors and Financial Life Planners. We will be adding more interactive and educational content this year and into the future. As noted above, the new website is accompanied by our new logo.

Dawna DuClau earned the Financial Paraplanner Qualified Professional (FPQP™) designation last spring and has been energetically expanding her financial planning skillset all year. Acadium has greatly benefitted from Dawna's talents and dedication to constant improvement.

In 2021, Frank Hujsa will be growing his expertise by pursuing the CLU®, or Chartered Life Underwriter designation. This will demonstrate in-depth knowledge of life insurance law, advanced life insurance strategy to address complex estate planning scenarios, and fluency in the life insurance underwriting needs of business owners and professionals.

We look forward to reflecting on the tumultuous past year, our strategy at the present and into the future, and any other topic that is on your mind at our next review. Until then, let us thank you again for being our clients. It is a privilege to serve you.

Frank Hujsa, CFP®, CLU®

Partner, Acadium Financial Partners
27499 Riverview Center Blvd, Suite 108
Bonita Springs, FL 34134

Lindsey Hansen, CFP®

Partner, Acadium Financial Partners
3601 PGA Blvd, Suite 301
Palm Beach Gardens, FL 33410

Thomas Udovich, CFP®

Partner, Acadium Financial Partners
3601 PGA Blvd, Suite 301
Palm Beach Gardens, FL 33410

Any opinions are those of Frank Hujsa, Lindsey Hansen, and Thomas Udovich are not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc. member FINRA/SIPC. Acadium Financial Partners is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc.