Despite the long list of immediate and long-term financial problems brought on by the Covid-19 Pandemic, stock investors remain optimistic in 2021. Added to the list of concerns last week was the political mayhem at the Capitol.
Stock Investors Seem Indifferent to Extremes of Politics
The U.S. Stock Market remains resilient and indifferent to politics despite the turnover of power from Republicans to near-total Democratic control of the White House and Congress. Here’s the bright side.
• Vaccines stumbled out of gate, but states will figure out logistics and be getting more shots in arms in coming weeks. Vaccinating 328 million Americans is a big task that takes time.
• It’s likely that consumer demand that’s been literally locked up, will drive additional retail spending, travel, and consumption later this year.
• The Fed has all but promised Ultra-low interest rates for the coming year or two barring an unexpected spurt of inflation due to the massive monetary inflation and attempts to stimulate the economy back from a near-death experience.
• Energy in the U.S. has been cheap with gasoline under $2 a gallon and natural gas so cheap it was being excessively flared into the atmosphere just to get rid of it. Green advocates will stop the flaring and fracking almost immediately.
• More large scale stimulus programs are coming. This week a $1.9 Trillion Dollar Biden-Democratic-led Congress wants to create more money out of thin air and push it into the economy.
Stimulus Aiding Investors in High-Tech, Gold, and Silver
Just as the first stimulus programs in 2020 helped pull Americans out of the economic black hole, it also found new money flowing in large waves into Stocks, Gold, and Silver. The rich got richer as the lower class lost 11 million jobs.
With newly created “free money” flowing like water out of Washington D.C. Stock investors seized the opportunity while taking a renewed interest in Gold and Silver.
Here’s a look at how all major asset classes performed over the course of the 2020.
|Asset Class||2020 Return||Asset Type|
|U.S. Small Caps||18.5%||Equities|
|U.S. Corporate Bonds||9.7%||Bonds|
|Europe, Australia, Far East||5.1%||Equities|
|U.S. Real Estate||-8.4%||Real Estate|
With Obama administration executives headed back to the White House, the far left agenda will turn the country 180 degrees from the direction Trump was headed. Politics will radically change the financial direction and economic success of America in the 2020s.
In our opinion, politics will further impact technology toward the greening of the planet and provide Stock investors who chose the right Stocks with outstanding successes. However, the high cost of Stocks at this moment in history may see significant corrections to the mean. Bubbles are always hard to see until they burst.
Here’s the chart that worries us the most, the bubble S&P 500 P/E ratio:
Why Should Savers Be Worried?
The biggest unknowns going forward are quite disturbing. Here are the pressing questions of the day.
Will massive monetary inflation result in rising costs of fuel, energy, food, commodities and housing delaying the economy coming out of a severe recession?
Will America’s political instability and the Trillions of new dollars created undermine the U.S. Dollar as the world’s reserve currency?
How much long-term damage has the Covid-19 Pandemic done to millions of workers and at least 100,000 small businesses that are shut down forever.
Will the worldwide airlines, cruise ships, travel, leisure, hotel, and live entertainment industries recover— or will business remain stagnant as the Covid-19 vaccine takes a year or two for global rollout?
Will enough Americans get the vaccine shots to create a successful herd immunity?
Finally, will stock investors suffer through an unexpected sell-off or two that could exceed a 20% correction?
Our crystal ball has been broken for some time now. We have no way of seeing how long or how severe the Covid-19 impact will be on the financial future of American workers and business.
With Covid-19 cases, hospitalizations, and deaths at record levels— and lockdowns still weighing heavily on the economy, it feels more like we’re in the fifth inning of a baseball with the game tied and all sides still wondering who will win.
To protect yourself, we recommend you balance, diversify, and protect your life savings carefully. The decisions you make in the coming days and weeks may determine your lifestyle in your retirement years. Personally, I’d rather be safe than risk my way through the minefield of 2021 unknowns.