Concerns for the Stock Market Ahead of 2021
With a new vaccine in the works and with a new president-elect ahead for the new year, it seems that the markets could be financially headed in the right direction since the beginning of this year.
However, there is still plenty of risks that are unknown as we head into the new year with unemployment rates increasing and with possible shutdowns looming from the effects of this winter.
With only a few weeks left of 2020, banks have issued a flood of 2021 forecasts anticipating “a sharp “V” shaped recovery to take hold before long.”
We’ve been through so much this year in 2020 and forecasts from experts haven’t really been that accurate as of yet.
According to Forbes, “November was a historic month for stocks. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite rose 11.8%, 10.7% and 11.8%, respectively.”
This is hopeful for the year ahead especially with the recent news of a possible vaccine in the works.
This vaccine is the first step for some kind of normalcy to the tough past few months.
According to Jefferies strategist Sean Darby, “Improving prospects for a vaccine, easy lending conditions and broader participation among cyclical and value stocks will help propel the stock market higher in 2021.”
As with strategists at JPMorgan, those at Goldman Sachs agreed that a vaccine will be the most critical catalysts for the stock market in 2021.
Energy, financials, and industrials sectors have reflected broad equity strength such as Tesla who surpassed 600% just this year.
Goldman said, “it expected the S&P 500 to surge 19% from Monday’s close to 4,300 by the end of 2021, with gains tacking on an additional 7% to 4,600 by the end of 2022.”
There’s also the confidence that stocks may keep reaping the benefits of the massive infusion of monetary support from the Federal Reserve.
The monetary and fiscal easing programs the Federal Reserve and Treasury have launched since the start are meant to keep liquidity flowing through the economy.
Since the market throughout the year saw high and lows, there’s nothing surprising to an investor or sudden that it was back in March.
However as rising cases continue to loom over the US and as Congress still continues to battle with another stimulus package, that could possibly lead to less consumer spending and could impact unemployment.
“Labor market watchers could be ever hopeful for a more meaningful decrease in jobless claims in the long run,” said Mike Loewengart, managing director of investment strategy at E-trade Financial.
The stimulus package has long-awaited Americans to help combat the negative impact that the economy has faced during the lockdowns has been disputed for months.
There’s also the curiosity to when and who will be the first to receive the vaccine once it becomes available or if there’s enough funding to distribute the vaccine.
One strategist wonders, “What if consumers and businesses, twice bitten by the pandemic, stay much more cautious for much longer after the second wave than after the first?”
Things like unemployment, the distribution of the vaccine, and the speculation surrounding the second stimulus package are factors that can not be overlooked going forward in the next year.
Sources:
https://www.cnbc.com/2020/12/02/stock-market-futures-open-to-close-news.html
https://www.barrons.com/articles/what-will-stocks-do-in-2021-and-2022-51605050560
https://www.cnn.com/2020/11/30/investing/premarket-stocks-trading/index.html