WHAT A YEAR!!
What We Are Seeing:
Former Vice President Joe Biden defeated President Trump in the 2020 election. The 2020 election marked the highest voter turnout since 1900.
While the Presidential Election was determined, the race for control of the U.S. Senate is still ongoing. Both Georgia Senate seats will be determined via a January 5th runoff. If either Republican incumbent holds onto their seat, the party will retain majority control of the Senate.
The markets have responded favorably since election day, with all three major U.S. indices up around 10% with two weeks remaining in the year. While some of this positive return may be linked to encouraging developments in the COVID vaccine (see below), it is also an indicator that investors are optimistic about the potential for a Republican Senate.
Multiple drug manufacturers (Moderna & Pfizer/BioNTech) rolled out COVID-19 vaccines. Initial projections estimate 10-20m available vaccines by year-end, 50m produced in January/February, and 150+m for Q2 2021. The timing of the vaccine comes at a good time, as case volume and COVID-related deaths are again on the rise.
There are countless reasons why 2020 has gotten a bad rap, all of them deserved. This year involved social unrest, an unprecedented health crisis, and an election marred by confusion and a lack of decorum. That said, the current climate that we are experiencing as the year draws to a close has a positive tone.
The race to discover a vaccine for COVID-19 demonstrated the resilience and ingenuity of the American people.
A larger percentage of Americans turned out to vote for this election than any other election in the last 120 years.
With the CARES Act rollout, and another round of stimulus on the way, U.S. leaders remain vigilant in their attempts to lessen the financial blow from the virus.
While corporate earnings growth still slowed, the deceleration was much less than projected.
Many of the factors above contributed to a sharp "V-shaped" recovery in the U.S. Stock market.
Black Friday and Cyber Monday provided some insight into consumer spending behavior this Holiday season.
186m individuals shopped between Black Friday and Cyber Monday, only 3m lower than 2019
Online shoppers increased by 45%
What Is Being Done:
Strauss Financial Group
Given current low interest rates, we are continuing to explore various alternative solutions for income-seeking clients. Two examples of this are fixed annuities and market-linked CDs.
Conversations about gifting and capital gains, both of which could change under President Biden.
2021 - Rounding the Corner
There are certainly several factors that remain a cause for concern going into 2021. The COVID-19 vaccine is being introduced on a large-scale, but the logistics and timeline of a wide-spread adoption remain unclear. Note: It is estimated that 60-70% of the population will need to receive the vaccine before herd immunity is reached.
While the Presidential election is decided, the race for the remaining Senate seats in Georgia will go a long way in determining what the political landscape will look like over the next two years.
The change in leadership also leaves open the possibility for changes in oversight/regulation among some of the largest U.S. corporations. The five largest U.S. companies currently make up 22% of the S&P 500, meaning that any changes in corporate tax law or regulations may have a large impact, not only on the individual companies, but on the broader market.
Looking ahead, it is important to remain both optimistic and prudent. There are many causes for optimism (vaccine, re-opening, additional stimulus, etc.), but that optimism must not be blind. From an investment standpoint, we see opportunity in specific areas. Global growth looks promising, as certain countries bounce back quickly from the virus. Smaller companies may offer more investment variety, compared to the behemoths atop the S&P 500. Stock selection will remain crucial, as certain sectors will recover at differing rates. Tax consciousness will become even more important with President Biden in office.
Heading into a year of uncertainty, there are still a handful of absolutes. The will and determination of the American public remains undefeated, innovation and resilience are part of the fabric of our culture, and our Firm will continue to serve and support our clients through every peak and valley. Here is to a healthy and prosperous New Year!
January 1, 2021
Investment advice offered through Strauss Financial Group, Inc., a Registered Investment Advisor.
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