As 2020 sunsets, we welcome in 2021 with renewed hope that the new year will bring with it, health, wealth and joy. Areas of the economy have been damaged and may never fully recover, but other areas will adapt, reinvent, and help reinvigorate growth.
2021 is primed to deliver advances to further limit the impact of COVID-19, and the goal remains keeping the economy as open as possible while keeping people safe. Continued progress in the response to COVID-19, including recent stimulus measures by the government, will be key to sustaining the economic recovery. As the pandemic subsides, restrictions are lifted and consumers’ daily lives return to something close to normal, the pace of the recovery most likely will pick up speed—probably in the middle of 2021.
Another major milestone will be moving past the market uncertainty caused by presidential elections. Historically, the post-election environment has been positive for the stock market. S&P 500 Index returns have been strongest with a divided Congress—one party controlling the House of Representatives and the other party controlling the Senate. A split Congress with President-elect Joe Biden in the White House could be viewed as friendly to the markets.
Biden’s proposed corporate tax changes would potentially cut S&P 500 earnings by 10% or more in 2021, but a divided government most likely would take those proposals off the table. Smaller, targeted tax increases might still be possible to fund a scaled-down version of Biden’s green energy and infrastructure investment programs, something that has bipartisan support.
Also, Biden’s administration might reduce or eliminate tariffs, which could grease the wheels of global trade and provide a boost to corporate earnings. Greater clarity on trade may make it easier for some companies to do business, but there’s the potential of a more challenging regulatory environment as well.
Sound financial advice charted a long-term path for many investors that kept them from getting off course in a turbulent 2020. There still will be risks to navigate in 2021, but it’s important to remain focused on long-term investing goals, stay on course, and power forward.
Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.
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