2021 Off to a Fast Start
February 4th, 2021 | Economic Update, Investments, Retirement, Work to Wealth
Our featured article of the month, 2021 Off to a Fast Start, provides a quick summary on the most recent events that occurred during the first few weeks of this new year and the markets’ reaction. With a new administration firmly in place, the excitement surrounding the festivities and related activities are expected to subside as the government gets back to work. With a more subdued atmosphere, the markets can once again refocus on the financial implications of the virus on the economy and society.
The expectations for this year are positive due to the roll out of the vaccine and the gradual reopening of the economy. While it is still feared by some that things will never look the same again, there seems to be scaring but not necessarily a complete face lift. The hardest hit sectors, especially food service, will likely exhibit the harshest damage, alongside retail and small business. Time will tell as the markets evaluate the landscape that will include new policy interventions intended to ease some of the damage.
Market volatility continues into the new year.
The first week of 2021 has already had many ups and downs. Just because it’s a new year doesn’t mean that the 2020 issues go away, and so far, 2021 has been no exception to this rule.
The markets opened on January 4 and traded lower out of the gate, with the S&P 500 dropping 1.5%. The last time the market opened lower was in 2016, when the S&P 500, the Dow Jones, and the Nasdaq Composite all dropped on the first trading day of the new year.1,2
The stock market’s first hurdle of the New Year was to assess the runoff elections happening for the two Senate seats in Georgia. A special election has only happened three other times in our nation’s history, so the market appeared anxious about the process.3,4
The bond market also got into the act early in the new year. The yield on the 10-year Treasury bond closed over 1% for the first time since March 2020 as investors anticipated a pick up in inflation.5
The market’s second hurdle was the electoral college count that would confirm Joe Biden as the 46th president of the United State. A protest during the vote count unnerved investors, and most of the New Year’s rally was undone. But a day later, the market climbed higher as traders looked past the unrest.6
What does this fast-paced market activity mean for you, as an investor?
There will always be a lot of noise. But remember, making a change to your portfolio should be driven by sound analysis, not an emotional response to current events. The events of the past few days are part of the volatility that comes along with investing, and something we’ve anticipated as we developed your overall financial strategy.
If you are concerned about one or more of the policies being discussed in our nation’s capital, please give us a call. We’d welcome the chance to hear your perspective, and hopefully, we can provide some insight and guidance.
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1. Barrons.com, January 6, 2021
2. USAToday.com, December 31, 2020
3. WashingtonPost.com, January 5, 2021
4. CNN.com, January 6, 2021
5. The Wall Street Journal, January 6, 2021
6. Yahoo.com, January 6, 2021