How Will the Market Fare in 2021?

Lauren Smith |

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2020… Not the most fun year any of us have ever had, but we got through it. While the challenges presented last year certainly didn’t disappear on January 1, 2021, there are a lot of positives that we can focus on as we move forward, specifically regarding the market and overall economy.

First and foremost, we have several vaccines now. Johnson & Johnson, for example, has a one-dose vaccine with 30 million doses set to ship. Though I initially expected that the world would return to (somewhat) normal sometime in September this year, I now believe it could be even sooner than that.

As you probably already know, I’m not in the prediction business—I’m in the reaction business; my crystal ball gets fuzzy right about 8:30 a.m. when the market opens. That said, here’s the one thing that scares me about 2021: So far, there doesn’t seem to be anything scary on the horizon, market-wise. In other words, I don’t see any real red flags out there at the moment, and that kind of calm can be a tad unsettling. Nevertheless, there’s nothing to raise alarm about, at least not right now.

Sure, we have a new administration in the White House, and the Democratic Party has claimed control of the House and the Senate; I understand that as a result, taxes, tariffs, and regulations will more than likely increase and that all those things can affect stock prices. However, the truth is, we’ve been here before. We’ve had the highest corporate tax rate in the world, and we still grew economically.

The market is harboring a ton of pent-up demand, and the Biden administration will be ushering in even more government stimulus than we saw last year. That’s all great news for stocks. The M1 money supply has grown at a steady rate of about 6% over the past decade; just recently, it grew by 25%—a colossal increase, given the time frame. That money is finding its way into the economy, which is more good news for just about everyone.

"We’ve had the highest corporate tax rate in the world,
and we still grew economically."

So, standing from our vantage point here in the middle of January and peering deep into the year, it’s hard to see a reason for negativity in the market. Technology had a monster year in 2020, and some of the WFH stocks have performed exceptionally well. I think we’ll see a small shift from growth to some value (e.g., industrials, materials, financials). It wouldn’t hurt to have a chat with your financial advisor about the sort of considerations you should be making in the market this year.

Hopefully, you found this message insightful. As always, just give me a call with any questions, comments, or concerns you may have. I’m happy to help, and I look forward to hearing from you soon.

The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of the author, and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

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