2020 Year in Review

Expectations for 2021

December 21, 2020

This year will be one that every adult will remember for the rest of their lives. 2020 was a historic year for several social reasons, including the COVID-19 pandemic, the third US President to be impeached by the House of Representatives (but not confirmed by the Senate) and his election defeat, and mass social unrest in the US around the Black Lives Matter movement that extended across the globe. These events led to market collapses, volatility and more. Here is a quick update looking back on the year and potential expectations for 2021.

Market Notes of 2020

Of course, world markets also made history with the steepest bear decline in history, the highest volatility reading on record, the first time oil futures went into negative territory, the fastest recovery of a market from the bottom of a bear, and the first $2 trillion public company.

When any financial advisor talks about 2020, it would be impossible to do so without mentioning the year’s volatility and its cause. The COVID-19 pandemic wreaked havoc on societies worldwide, upending decades of relative stability in average population health in western nations. The virus that started in Wuhan, China, caused most governments to close large portions of society and businesses to contain it over two waves of the virus. The countries that failed to ‘bend the curve’ fared the worst typically in case counts and subsequent deaths, but spared their economies, initially, the worst of the market declines.

The pandemic caused mass unemployment and the most volatile economic markets ever. Even as the battle for the US presidency was raging in November, the fact that two vaccine producers (Pfizer/BioNTech and Moderna) revealed a 90%+ efficacy for their vaccines proved a real positive for markets. The third vaccine by AstraZeneca/Oxford is only 70% effective but is much cheaper and does not require the extreme cold storage of the other two. Yet does the appearance of vaccines equal a safer market environment in 2021 for investors?

Beware Over Optimism in 2021

The road ahead is still a bumpy one, especially for markets. The Coronavirus is still raging in a second wave in many countries, with a new even more transmissible variant, recently discovered ravaging through southern London and the UK. A global vaccination is a massive undertaking. One that will not be completed quickly. Expect the effort to take the better part of 2021 and for it to still affect markets.

What is even more detrimental for 2021 is the state of government finances for almost every nation that has attempted to spend their way through the pandemic in support of their societies. These costs will need to be brought under control in coming budgets. This could lead to increased taxes and fewer services as governments in the years to come cut expenses and pay for the pandemic.

It is estimated that COVID-19 could cost the world $11.5 trillion. This includes the lost GDP from the projected deaths. However, one positive note for my clients is that value stocks have traditionally beat other types of equities in market recoveries. My long-term value and growth investment style will provide the needed boost for many portfolios coming out of this bear market year.

Wealth Sense in 2021

Be sure to tune in monthly in 2021 for my continued thoughts on the markets, how they may change and what to expect.

Looking to make a change, want a second opinion, or looking for additional advice? Feel free to reach out to me any time by phone or email.

Author Steve McBride, Investment Advisor, Echelon Wealth Partners looks forward to connecting with you about your future wealth management needs.

 

Disclaimers

This blog is solely the work of Steve McBride for the private information of his clients. Although this author is a registered Investment Advisor with Echelon Wealth Partners Inc. (“Echelon”) this is not an official publication of Echelon, and this author is not an Echelon research analyst. The views (including any recommendations) expressed in this newsletter are those of this author alone, and they have not been approved by, and are not necessarily those of, Echelon.

Echelon Wealth Partners Inc. is a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund.

Forward-looking statements are based on current expectations, estimates, forecasts and projections based on beliefs and assumptions made by authors. These statements involve risks and uncertainties and are not guarantees of future performance or results and no assurance can be given that these estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements.

The opinions expressed in this report are the opinions of this author and readers should not assume they reflect the opinions or recommendations of Echelon Wealth Partners Inc. or its affiliates. Assumptions, opinions and estimates constitute this author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results.

These estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements. Echelon Wealth Partners Inc., its divisions, subsidiaries, and affiliates, do not provide any income tax advice and does not supervise or review any income tax returns. Please consult your accountant.

Source(s): 

https://www.theatlantic.com/family/archive/2020/07/history-textbook-entry-year-2020/613885/

https://www.fool.com/investing/2020/09/10/5-ways-the-stock-market-has-made-history-in-2020/

https://am.jpmorgan.com/gb/en/asset-management/adv/insights/market-insights/monthly-market-review/

https://timesofindia.indiatimes.com/business/international-business/covid-may-cost-global-economy-11-trillion-study/articleshow/79631187.cms

https://www.blackrock.com/us/individual/insights/taking-stock-quarterly-outlook