Insights + Resources

Market Update: 2021 Brings a Fresh Start

Jan 8, 2021

Market Update
Market Update

A new year offers a welcomed turn of the calendar and a fresh start. However, it’s difficult to put 2020 completely behind us just yet because the COVID-19 pandemic still presents a significant threat. Healthcare workers continue to perform heroically, while the rest of us must continue to make sacrifices until vaccines are widely distributed.

Despite the ongoing threat of COVID-19, it’s important to remember the tremendous progress the US economy has made in its recovery so far:

  • The US economy has created more than 12 million jobs since April 2020—more than half the number of jobs lost during the spring lockdown—and has brought down the unemployment rate from 14.7% in April to 6.7% in November.
  • Holiday shopping was up a better-than-expected 3% year over year according to MasterCard data. And it shouldn’t be a surprise that a 49% increase in online sales was the big driver. This growth is impressive when we remember how different the world looked in late 2019 when businesses were fully open without restrictions, shoppers freely visited brick-and-mortar stores, and unemployment was near record lows.
  • The manufacturing sector has staged a strong recovery. The Institute for Supply Management (ISM) manufacturing index in December tied for its second highest reading in 15 years and has registered above 50—the dividing line between expansion and contraction—for seven straight months.

The economy lost some momentum as 2020 ended with more rapid COVID-19 spread and renewed restrictions. Still, the US economy appears poised to grow through the end of the pandemic, bolstered by the new $900 billion fiscal stimulus package passed December 27, 2020, which provides much-needed aid for small businesses, consumers, schools, and the healthcare system. US gross domestic product (GDP) is expected to grow 4.6% annualized in the fourth quarter of 2020, followed by 2.5% in the first quarter of 2021 (source: Bloomberg).

A better economic backdrop may mean better corporate earnings. Analysts’ consensus estimates for S&P 500 Index company profits have been rising steadily in recent months (source: FactSet) amid the improving economic outlook. S&P 500 companies are expected to return to 2019 profit levels in 2021—a remarkable achievement if realized.

Thanks to the remarkable work of medical researchers and doctors, the end of the pandemic is approaching, and the outlook for the economy and stock market appears promising. But the road ahead may not be smooth. The vaccine rollout is still in its early stages and has significant logistical challenges. US-China tensions aren’t going away any time soon. Higher interest rates and a pickup in inflation could put pressure on stock market valuations at some point. Divisiveness in America is at an extreme. And following the Georgia Senate elections, tax increases may be likely—probably in 2022.

One thing 2020 has taught us as investors is the importance of sticking to a long-term investment plan. That may be easier said than done when volatility arrives—and we had our fair share of that in 2020. Investors who stayed with their plans in 2020 benefited as volatility presented opportunities.

Best wishes for a successful 2021, and please contact us if you have any questions. For more insights and resources, be sure to sign up for our Weekly Market Commentary. Follow our YouTube channel where we regularly post our Epic Market Minute videos. Follow us on LinkedIn, or like us on Facebook. And as always, please don’t hesitate to reach out to a dedicated service professional at Epic Capital.

More Insights

Sep 23, 2022

The Federal Open Market Committee (FOMC) increased the target rate by 75 basis points (bp) to a 3.25% upper bound and delivered a more pessimistic outlook in their published Summary of Economic Projections.

Sep 21, 2022

  You may have seen this statistic before or one resembling it: the average 65-year-old retiring couple can now expect to pay more than $250,000 in healthcare costs during the rest of their lives. In fact, Fidelity Investments now projects this cost at $285,000. The effort to prepare for these potential expenses is changing the … Continue reading “Healthcare Costs are Cutting into Retirement Preparations”

Sep 19, 2022

Investors are routinely warned about allowing emotion to influence their decisions. However, they are less routinely cautioned about their preconceptions and biases that may color their financial choices. In a battle between the facts & biases, our biases may win. If we acknowledge this tendency, we may be able to avoid some unexamined choices when … Continue reading “Do Our Emotion or Biases Affect Our Financial Choice”

Sep 16, 2022

At one point or another, you may realize capital gains, which is a taxable event. What can you do about them? You can do what some investors do – you could recognize investments with a loss and practice “tax-loss harvesting.”

Sep 14, 2022

Everyone loves a winner. If an investment is successful, most people naturally want to stick with it. But is that the best approach? It may sound counterintuitive, but it may be possible to have too much of a good thing. Over time, the performance of different investments can shift a portfolio’s intent as well as … Continue reading “Rebalancing Your Portfolio”

Insights + Resources >