Three weeks into 2021 and already so much has happened! Let’s take a few mins to look back on Q4 2020 and talk about what we might expect for 2021.
Here’s your 2020 recap:
Joe Biden was elected President and Democrats (as of early January 2021) now control two pillars of government. Markets gained ground on news of a stable transition of power.
The Biden administration unveiled a new $1.9 trillion stimulus plan which rallied stock prices.
COVID-19 vaccine approval from multiple companies furthered optimism that we might be out of the woods soon although some uncertainty still remains around vaccine distribution. This is probably the biggest contributor to the stock market’s strong year-end finish.
The market had all-time highs back in February and then again in December with a short bear market dip in March. However, the stock market is not the economy and the economy is not the stock market. While the pandemic raged on, stocks soared. There are many explanations for this 2020 phenomenon, but a mix between low interest rates, gig economy scalability and the fact that Main Street is not Wall Street are all leading factors. The S&P 500 returned 18.40% for the year. The U.S. markets again outpaced international markets, which were up 7.82% as represented by the MSCI EAFE Index. Driven by falling interest rates, the Bloomberg Barclays U.S. Aggregate Bond Index gained an impressive 7.51%.
As we peer into 2021, several key points of uncertainty remain:
While there has been excellent news on vaccine development from multiple manufacturers, there are still barriers in production and distribution.
Will the virus mutate to the detriment of the vaccine?
What will the Republican party look like going forwards?
Misinformation and social injustice are still top of mind moving into 2021.
So what does all this mean for you, your portfolio, your near-term financial outlook, and your long-term financial outlook? Last year has reinforced our commitment to the following core investment principles:
Establish a long-term financial plan with realistic goals
Invest in a diversified portfolio to reduce overall risk and increase returns
Make sure your portfolio is aligned with your risk tolerance
Ignore the short-term noise and remain focused on the plan
Cheers to a more optimistic 2021!