Anna Rathbun, Chief Investment Officer
As 2020 took its final bow, it placed us in an interesting point in time between the current reality of an intensifying pandemic and the promise of a vaccinated future. The gap between this present and future is where the uncertainty lies for the markets, and the Fed’s liquidity-friendly programs have been instrumental in bridging this gap. A supportive fiscal policy, such as the second stimulus bill passed during December, should also help for the time being. So it was not a surprise to see the markets focus on the developments in Washington, as lawmakers negotiated through the month to arrive at an aid package. Risk assets responded positively to the support from the federal government and powered through another month to end this difficult year with respectable returns.
- As earnings season tapered off, the passage of the second stimulus bill coupled with avoiding the Fiscal Cliff fueled the markets to etch record highs in major U.S. equity indices.
- In general, there is a tug-of-war in market sentiment between the current coronavirus infection situation and the confidence of a working vaccine, and high valuations in equity markets mean increased likelihood of volatility ahead.
- Across the Atlantic, the U.K. and the European Union avoided a no-deal Brexit, and the markets had expected a deal between the two entities as a base case scenario.
- Positive sentiment for risk assets meant tighter spreads and additive price returns for corporate credit instruments.
- In its December communication, the Federal Reserve repeated its past reservations about the risks posed by the pandemic, but with the hope that the U.S. economy may rebound by the end of 2021.
It feels great to usher in the New Year with COVID-19 vaccines in hand. If 2020 was the year of the great vaccine discovery, 2021 will be about the execution of the global vaccination effort. We expect that this endeavor will be uneven around the world, and therefore, the economic recovery to be uneven as well. Nonetheless, the road out of this pandemic is emerging before us, and in 2021 we hope to move beyond “surviving” the pandemic to “healing” from it.
The information included in this update is provided for informational purposes only and should not be construed as investment advice. The views expressed are those of the author based on the data available when this update was written and are subject to change based on market conditions or other factors. CBIZ Investment Advisory Services and/or CBIZ Retirement Plan Services disclaims any liability for any direct or incidental loss incurred by applying information supplied in this update.
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