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by MICPA | Jan 5, 2021
Mass distribution of the COVID-19 vaccination is expected to drive a swift economic recovery in 2021, with many economists predicting slowed growth this quarter before rebounding to reach pre-COVID levels within a year, according to a new poll by Reuters. This signals a steep turnaround since August, where 60% of those polled expressed belief it would take at least two years to reach pre-pandemic GDP levels1.
That said, there are remaining areas of concern according to David Autor and Elisabeth Reynolds, economists at the Massachusetts Institute of Technology (MIT), who caution that the COVID-19 crisis is likely to “exacerbate economic pain in the short and medium terms for the least economically secure workers in our economy, particularly those in the rapidly growing but never-highly-paid services sector.” This could lead to a recovery that is too sideways to fully recover, Foreign Policy reports, which could present political and societal risks to the U.S. economy moving forward should further polarization result2.
Still, Wall Street remains optimistic, perhaps overly so, according to Bloomberg’s collated commentary of nearly 500 major institutions. The overwhelming theme of these expectations rely heavily on vaccination distribution and a reopening economy, but also on expectations for moderate policy changes as well as recent and future stimulus activity3.
So, what overall expectations can financial advisors hold for their clients as 2021 officially kicks off? Despite the rising enthusiasm that COVID-19 will be controlled via vaccination distribution, proceeding with caution is still the best play. According to Nasdaq, investors risk falling prey to the equity market if expectations exceed reality, leading to a correction.
Other expectations include:
Advising clients on their portfolio promises to be a challenge in 2021 as several unknowns continue to loom, but a healthy dose of caution alongside an agile strategy could make all the difference.
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Source: MICPA
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