As we begin 2021, I think it is imperative to reflect on the difficulties of the past year and how we have persevered through some exceedingly difficult challenges for our families, friends and certainly each other. Coved-19 arrived with a vengeance infecting Americans of all ages, resulting in sickness and the deaths of over 400,000 people in our country alone. As a nation, we were not prepared for anything of this magnitude so we became diligent in our efforts to mobilize the pharmaceutical industry to press ahead to develop a vaccine in such a short period of time. Ironically, two of the three companies in play (Pfizer and AstraZeneca) have been long term holdings in our portfolio and should benefit greatly as their vaccines are distributed worldwide.
Domestically, the past two weeks have seen mostly negative headlines with regards to political, social, and economic developments. Yet, the markets have remained orderly and continue to advance, hitting all-time highs. The money flow continues to impress the institutional and retail investors who anticipate a domestic and worldwide recovery of significant proportions. This global growth along with expanding corporate profits could set the pace for a significant advance. However, the need for caution is significantly a part of our strategy at DDIMG, we are deeply rooted in preservation of principal and value management.
In May 2020, we chose to move 50% of the value of all portfolios away from the stock and corporate bond markets, and into government guaranteed U.S. Treasury 90-day bills for your protection. With the ongoing degree of uncertainty, we commenced a subsequent purchase of Treasuries in the end of September for another round of 90-day bills, but at 25% of account balances rather than 50%. The objective here was not only to protect your principal, but to have cash available for future purchases at much lower prices if a correction/selloff were to happen.
We continue to have concerns with the growing US deficit of $28 trillion, and the level of government spending expected to increase dramatically with the next round of economic stimulus. US GDP (gross domestic product) is currently just over $21 trillion. This makes the federal deficit relative to GDP the highest since World War II. However, economists expect real GDP to grow 4% in 2021 (Q4 over Q4). This forecast factors in consumption, business investment, home building, government spending, trade and inventory. Beyond COVID-19, the domestic and international markets are poised to make a solid recovery, already pricing themselves with this recent market advance. We will continue to be moderately conservative in our approach to risk management and maintain an allocation of 59% dividend equities, 10% US Treasuries, 30% investment grade corporate bonds and 1% cash.
In closing, we wish you all health, happiness, and prosperity in 2021. We will get through this together. Please do not hesitate to call us with any questions or concerns.
