The year 2020 and “unprecedented” have gone hand in hand for the past year now, and with good reason. The entire world has had to deal with new obstacles and challenges in every aspect of daily life. This contributed to the major disparity between main street and wall street last year. Main street suffered and continues to do so, while wall street had a major setback, but rebounded and then roared on through the year with some help.
The ability for wall street to flourish amid the global pandemic can be attributed to 3 things.
Despite the worst pandemic in 100 years, along with an economy in recession, the markets rallied after the “Pandemic Plunge” in March. Increased hope for political stability and medical clarity made 2020 a surprisingly strong year with substantial gains. Many indices set a series of all-time highs throughout the latter part of the year.
Following the onset of Covid-19, financial markets were buoyed with help from the Fed and unprecedented fiscal and monetary stimulus. Immediately following the March sell-off, a historic $2 Trillion stimulus bill was signed into law, boosting the economy enough for stocks to bounce and rally. Meanwhile, interest rates were kept low throughout the year, and while this led to some price depreciation in longer-term bonds, investors fled to the stock market. Then, at the end of the year, Congress approved another $900 billion stimulus bill to help stabilize the economy and provided the fuel that equities needed to maintain their rise into 2021.
While some industries face a long road to recovery (airlines, cruise lines, hotels), many American (and international) companies have successfully navigated these tough times and exited 2020 in strong financial shape. The ability to utilize or develop new technologies and adapt to the prevailing environment were shown to be the difference makers in 2020. As shocking as it may sound, the fundamental outlook for stocks is skewing positively as we start the new year.
Looking Forward in 2021
Even though we may be in the darkest part of the tunnel, financial markets have been willing to look ahead to the light. The consistency of good news surrounding vaccines and stimulus, as well as getting over the holiday season surge of COVID-19 cases, has helped investors look past any negatives and move into 2021 with a more positive outlook. Three factors that could help financial markets continue their positive momentum into the New Year include the ongoing vaccine rollout, increased fiscal and monetary stimulus, and a post-lockdown economic recovery once restrictions are lifted and the world can start to return to some semblance of normalcy.
How we can Help
One of the biggest takeaways from this past year is that a well-planned, long-term-focused and diversified financial plan can withstand virtually any market surprise and a related bout of volatility.
If you are in need of a comprehensive financial plan, download our financial planning questionnaire to get yours started today.