As we cap off this year of lockdowns and COVID-19 protocols, the year 2021 is looking at all the
brighter in terms of economic growth.
2021 is the Year of Economic Growth
Though a controversial debate, it is believed that the economy will see its greatest improvement in the past 20 years. This is due in part to the COVID-19 recession stimulus package that is set to increase GDP by 35%. This is the largest stimulus package since 1915.
Additionally, rapid economic growth is usually accompanied by inflation. Since inflation erodes the value, investors would most likely sell yield payers like bonds and non-cyclical stocks. While cyclical stocks will experience some selling pressure, this will be offset by the predicted economic boom and earnings growth of cyclical stocks in 2021.
In Search of Pre-pandemic Normalcy
With the announcement of Pfizer and BioNTech of a COVID-19 vaccine at 90% effectiveness, major stock indexes have surged. This is celebratory news for companies and sectors that received a major blow during the pandemic.
While Pfizer has not made any official announcements when the vaccine will be made available to the public, these pre-pandemic sectors promise a lot of demand in the coming year. Consumer- demand will be at an all-time high. Sectors that took a toll during the pandemic, such as those involving leisure, travel, hospitality, and chemical material, are anticipated to do well in 2021.
Will President-elect Joe Biden’s Win Have an Effect on Market Potential?
The development of the vaccine also coincides with the announcement of President-elect Joe Biden’s transition to power. While investors may look into stocks that may potentially work well under his terms (such as alternative energy and infrastructure), financial advisors reiterate that the development of the vaccine overshadows the seat of power at the White House.
Investors and financial analysts note that Biden’s presidency will not have much impact on the economy as an effective vaccine. Practically any industry that would involve people in close proximity, such as restaurants, entertainment, and hotels are all set to boost in terms of profit. Benefactors would include both company suppliers and servers.
How Do I Kickstart my Investments?
Financial analysts advise investing as early as your 20s, and becoming debt-free should be the first step. Start paying- off student loans and credit card debts. Once your finances are under control, start researching the stock market and take note of companies you believe will start growing in value over time.
A Few Years Down the Road
The best mindset for an investor is long- term. If retirement is planned, think of your investments in terms of decades and not per annum. Drops in the market caused by the pandemic will not have much effect on your overall cash credit. Jumping from one position to the other during these uncertain times may not turn out too well.
If nearing retirement, it would be best to look into retirement plans that would reassess your risks and rebalance your portfolio and assets.
Finding our Usual PaceWith the anticipated relief in the economy in the year 2021, experts recommend veering away from markets that have boomed during the pandemic, including delivery services and mega-cap technology. Investors should veer instead towards investments that hinge on the economic reopening. Make sure to look into industries that people are excited to engage in. The sectors worth noting over the next 18 to 24 months are value, financials, emerging markets, and healthcare.
