In 2021, the tunnel and the bright spot intensify

January 10, 2021

In our year-end market commentary, I shared how the 2020 economy stumbled through a tunnel while the stock market focused on the bright spot at the tunnel’s end — herd immunity and/or vaccine.

In 2021, our journey through the tunnel has gotten rougher. A new, more contagious virus strain has manifest. Vaccination rollout is slower than hoped. Our political situation continues to be very difficult.

Yet during the first week of the year, many stocks rose. The Dow and the S&P 500 were up 1.4% and 1.3% respectively.1

Most of this increase came after the Georgia Senate run-off and the violence at the Capitol. What bright spot is the market keyed in on? Investors assume our system of government will hold. They feel they can “do business” with the slight tilt of the Senate. It’s enough to get additional stimulus, but not enough for grand changes.

Our outlook continues to be positive over 12 to 24 months. If vaccination and herd immunity resolve/reduce COVID-19, we are likely to see pent-up demand and productivity gains that power an economic expansion.

We continue to overweight equities approximately 5%. As with any plans, we customize to meet the needs and comfort level of each client.

The new, more contagious strain of COVID-19 deeply concerns me. My daughter Annie is an ICU nurse dealing with the awful effects of serious COVID cases. As the new strain spreads, likely with insufficient vaccination, we are likely to see additional shutdowns. And the impact on our lives and our health will continue.

But, as we saw with the spring 2020 lockdown, our economy rebounds. While the loss of any life leaves big holes in families and communities, the financial system can heal fairly quickly.

As Annie coaches me constantly: Stay safe. Be cautious. Take care of yourself and those near you.


1. Yahoo Finance, January 7, 2021.

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