The year 2020 was the ultimate unpredictable event. No one at the beginning of the year knew the extent of the chaos the world economy was about to face. 2021 still holds uncertainty, since we’ve never seen a post-pandemic recovery in the modern economy before. But there are a few safe predictions we can make. Plus, we have some investment advice that should propel your portfolio to success, even in an uncertain year.
On March 3, we hosted a webinar on just this topic—“Constancy Amid Change: Managing Investment Risk in 2021 and Beyond,” with financial advisor Rob Thomas. Viewers got in-depth predictions and investment tips for 2021, all for free and from the comfort of their own home or office.
At this writing, it seems likely the US will reach herd immunity through vaccination at some point in 2021. That means we’ll be able to get back to our lives: back to work, back to travel, back to restaurants and theaters. All of this will fuel growth this year. Experts are predicting a full recovery of the US GDP, with full employment recovery taking a while longer.
The pandemic, while disastrous for the economy as a whole, boosted certain sectors, such as healthcare and tech that helped people work from home. Will that growth last once everyone returns to normal life? It’s impossible to say.
It’s also uncertain if the industries hurt the most, like airlines and travel, will recover fully. Even if people return to traveling at pre-pandemic levels, it likely won’t be until later in the year.
The Federal Reserve plans to keep interest rates near zero past the end of the year, which will drive some inflation. Ten-year Treasury note interest rates, however, are likely to rise somewhat, from their current level of 1.1% to around 2% at the end of the year. This will result in higher mortgage rates as well.
Despite all these sunny predictions for 2021, there are a few things to look out for. A stalled vaccination program or vaccine-resistant new variants could put off the post-pandemic recovery longer than expected. Global unrest can’t be predicted, and could cause economic repercussions.
So what should you do in the coming year? Most importantly, don’t rely too strongly on any given prediction. The post-pandemic recovery could be fast or slow, and we don’t even know yet when the pandemic will be over.
That said, there are a few important steps investors should take. First off, if you have money currently in the market, don’t pull it out now. And if you’re planning to start investing, don’t wait—prices are likely to rise.
Second—and this advice never gets stale—diversify. Some sectors crashed in 2020, while others peaked. Investors with diverse portfolios weathered the difficult year successfully. These trends are likely to reverse in 2021, with formerly struggling industries recovering and those that prospered cutting back a bit. If your portfolio is diverse enough, you won’t need to worry about any of that. Given the changes in the market over the past year, your portfolio may have become imbalanced. It’s a good time for some housekeeping.
Some experts recommend considering international investments, given the weakening of the American dollar. Economies will rebound globally, with China first and the developing world recovering more slowly. Spreading some of your investments among different countries can be a profitable decision.
More 2021 Predictions on YouTube
This article is just a brief summary of some issues important this year. For the full 2021 forecast and investing advice for the year, watch the webinar recording on our YouTube channel. If you are managing any investments this year, it’s a can’t-miss video to watch.