2021 Outlook


Welcome clients and friends!  As a continuing commitment to give timely information, I want to give you an Outlook for 2021 with a summation of thoughts of the advisors at our firm.

But first, what happened in 2020?  Everyone knows about the pandemic, shutdowns, masks and the election.  But if you look just at stock and bond market results, you would not have had a clue about all the turmoil that went on over the course of the year. What points do we need to remember, to give us direction in 2021?

Online commerce is here to stay.  We are not going to stop at the store to pick up a few items after work when you can have it delivered to your door the next day.

Individual investors have rediscovered the stock market.  In recent years, individual investors made up about 10% of the daily volume in the stock market, with computerized trading making up the bulk of the difference.  In 2020, it is estimated that individual investors made up to 30% of daily trading!

The vaccine is here, but the pandemic is not beaten yet.

We have new leaders in our Federal government.  We are expecting more stimulus and less infighting.

Some parts of the economy have been slammed, while others are quietly having their best year ever.  Think restaurants and cruise lines versus camper sales and landscapers.  It is estimated by Goldman Sachs that 60% of the missing jobs are in travel and leisure and other virus affected industries.

What do we see for this year?

If you are one to worry about government gone wild, worry less, as the filibuster is still alive and the ruling party always doesn’t agree on everything.  States will get additional money and probably new regulations for Big Tech.  But the Green New Deal or even higher taxes are not in the cards for 2021.

Interest rates will rise slightly.  The fed will not increase short term rates, but long term debt will take higher rates for investors to buy in.  Mild inflation will not hurt.

The dollar should fall against foreign currencies.  This will boost the value of overseas stocks.

Interest in value stocks that have not seen the big rise in share price could outperform.  We have mixed feelings about financial stocks.

Big Tech will have more challenges, but will still maintain.  Smaller companies that lead innovation will thrive- especially in healthcare, clean energy and technology.

All in all, we are cautiously optimistic for the stock market in 2021.  It all depends on stopping the virus, so businesses can reopen, people can travel and eat out with friends and some normalcy returns.  We also expect a downturn during the year, but with a quick recovery, as investors wish to buy in like they successfully did in 2020.  Bonds should maintain their prices, but not earn more than their yield.

This all relies on beating the virus. The end is in sight, but perseverance and optimism must prevail.  We look forward to seeing you in 2021!