After a year of living with the fear of COVID-19, many investors are hoping 2021 will bring a return to ‘normal,’ even if the new normal may not be exactly like the old one.
Optimism about the future has many investors feeling bullish, according to most of the sentiment surveys listed in Barron’s last week. Financial Times reported, “Almost universally, fund managers believe the year will bring a rebound in economic activity, supporting assets that have already soared in value since the depths of the pandemic crisis in March, but also lifting sectors that had been left behind. Bond yields are expected to stay low, lending further support to stock valuations.”
This doesn’t mean 2021 will be risk free. In its December market sentiment survey, Deutsche Bank asked more than 900 market professionals about the biggest risks to global financial markets in 2021. Here are the concerns they highlighted:
38 percent Virus mutates and vaccines are less effective
36 percent Vaccine side effects emerge
34 percent People refuse to take the vaccine
34 percent Technology bubble bursts
26 percent Central banks end stimulus too soon
22 percent Inflation returns earlier than expected
It’s possible none of these will occur and investors will sail smoothly into and through the new year. We hope that’s the case and next year brings with it a return to normal. Just remember, normal doesn’t mean risk-free. In 2021, investors will still need to balance risk and reward on the journey toward their financial goals – just as they do every year.
-Kevin Theissen, HWC Financial
