2020 Fourth Quarter Insights

August, 2020

Edition: 20

The 4 Disciplines of Investing for Retirement and Wealth Creation

  1. “Investing is a marathon and not a sprint.”
  2. “Do no harm.”
  3. “Knowledge creates success; stay calm, objective and long-term oriented.”
  4. “Choose carefully what you read and to whom you listen.”

“It’s not about how much money your make, it’s about the decisions you make with it that makes the difference.”
– Nicholas Sergio

Industrial Revolution, say what?

Are we experiencing a modern-day industrial revolution, similar to the three prior transformative periods that changed and formed the society that we all live in today? Let’s take a deeper look:

The First Industrial Revolution was the age of mechanical production, driven by the creation of the steam engine and how it transformed the transportation of goods and people in a more efficient and faster way.

The Second Industrial Revolution was the creation of the combustion engine and airplanes, providing the ability for society to move faster between locations. This revolution was also the beginning of the assembly line and mass production capabilities.

The Third Revolution ushered in the digital age and the creation of semiconductors, computers, electronics and the internet. In the early 90’s, as a college student I worked for Prodigy as an accounting intern. We were the first of two internet companies in the world and our competition was America Online (AOL). As competitors, we battled to connect the world via the World Wide Web. Scalability won that competition and I am sure you can figure out who won that race for internet leadership. I regress … but it was pretty awesome to review my list of stocks I followed through the Prodigy network daily on the internet.

The Fourth Industrial Revolution is the day and age we live in now. We are all living in a world of enhanced digitization that has been accelerated by the Covid-19 pandemic. This transformation is changing how we all live, work and communicate with one other. This transformation has allowed millions of people to work from anywhere in an efficient and, in some cases, a more productive manner. This transformation didn’t take years but rather weeks and was possible due to evolutions in technology that allowed for highly stackable, scalable systems to be deployed over a digital cloud. Wow. This revolution and change to societal communication, business operations and relationships is just beginning. This multi-year secular growth story will be fueled by advancements in autonomous vehicles, wireless technologies, artificial intelligence (AI), Internet of Things (IoT), 5G wireless technologies and the evolution of 6G technology. Who knows what future changes will be but we can be certain that society is changing as technology transforms our everyday lives?

The S&P 500 and Credit

After a decline of 34% earlier this year, the sixth steepest decline on record, and a closing low of 2,237 on March 23rd, the S&P 500 tagged an all-time closing high of 3,580 on September 2nd. This massive move up in price for the S&P 500 was confirmed by and S&P 500 cumulative advanced decline line.

Source: StockCharts.Com

Credit Confirms Price Moves of the S&P 500

During periods of high stress in the financial markets, the fear and stress will be in full display in the Bank of America High Yield Option Adjusted Spread. The lower the spread, the less fear of cooperate defaults in this half trillion-dollar high yield bond market.

Source: FactSet.Com

Dow Jones Transportation Index and the Philadelphia Semiconductor Index

The Dow Jones Transportation Index, an index of 20 transportation stocks, and the Philadelphia Semiconductor Index, an index of 30 semiconductor companies, recently both hit all-time highs. These are two more indexes that are confirming the move higher in the S&P 500; a far cry from the lows on March 23rd this year.

Source: StockCharts.Com


Secular Bull Market

Ladies and gentlemen, I have been writing exhaustively over the last several years about the great secular bull market that I believe we have been in since early 2013. My opinion remains unchanged. Market consolidations and good, market corrections are healthy and crashes cleanse the markets of excess risk as well as investors that have not performed adequate due diligence. Secular bull markets are formed by disruptive changes including the three prior industrial revolutions and now the fourth. These changes and disruptions to normal societal ways function to create doubt in the investor’s minds. Most investors don’t understand change, so they doubt it. Informed investors see the change, the future and embrace it. I felt compelled to directly address since all the naysayers compare today’s market to 1999. Most weren’t advisors or in the money management business at the time – I was. In my opinion, there are simply no comparisons to 1999 and I believe the greatest examples of this is the $5 trillion dollars in cash sitting on the sidelines. I’m sure those funds will flow into markets; margin debt will soar just as greed peaks and the bubble will pop similar to 1999.

Nicholas W. Sergio, AIF®


Founder & Chief Investment Officer
Banyan Wealth

Registered Principal & Financial Advisor

2024 RJFS Leaders Council Member



The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system. Dow Jones Industrial Average (DJIA) commonly known as “The Dow” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. The Russell 2000 Index measures the performance of the 2000 smallest companies in the Russel 3000 Index, which represents approximately 8% of the total market capitalization of the Russel 3000 Index. BPS stands for Basis Points and refers to a common unity of measure for interest rates, one basis point is equal to 1/100th of 1% or 0.01% it is used to denote the percentage change in a financial instrument. Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of capital might occur. All investing involves risk and you may incur a profit or loss of capital. There is no assurance any investment strategy will be successful. All information, data and analysis provided in this report is for informational purposes only and is not a recommendation to buy or sell any security. This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete; it is not a statement of all available data necessary for making an investment decision and it does not constitute a recommendation. Any opinions are those of Nicholas Sergio and not necessarily those of Raymond James and are subject to change without notice. Raymond James does not offer tax advice and services. You should discuss any tax matters with the appropriate professional. Holding investments for the long term does not insure a profitable outcome. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Forward looking data is subject to change at any time and there is no assurance that projections will be realized. High-yield bonds are not suitable for all investors. The risk of default may increase due to changes in the issuer’s credit quality. Price changes may occur due to changes in interest rates and the liquidity of the bond. When appropriate, these bonds should only comprise a modest portion of a portfolio. Investment advisory services offered through Raymond James Financial Services Advisors, Inc.* Membership is based on prior fiscal year production. Re-qualification is required annually. The ranking may not be representative of any one client’s experience, is not an endorsement, and is not indicative of advisor’s future performance. No fee is paid in exchange for this award/rating.


Share the knowledge:

Find us

Red Bank Office

11 Wharf Ave.
Red Bank, NJ 07701


Toms River Office

74 Brick Blvd,
Bldg 2, Suite 103
Brick, NJ 08723


Saddle Brook Office

250 Pehle Ave.
Suite 200
Saddle Brook, NJ 07663