On Air with Altair: 4Q 2020 Market Review Video
Want to hear Altair’s analysis of the markets, but do not have the time to read all of Altair Insight? Watch our video summary of the report and you will be caught up on our market review in 3.5 minutes.
The near-term outlook has weakened as the COVID-19 toll continues to rise and many areas maintain tight restrictions, as we saw with the recovery in employment stalling out in December. However, despite recent setbacks we firmly believe this recovery is durable. Vaccine progress and stimulus are the two biggest reasons for our positive outlook. Also, the all-important manufacturing and housing industries continue to be very strong. Consumers also appear poised to spend when the economy fully reopens, thanks to stimulus, increased savings efforts and the stock market’s gains. The next few months may be difficult with the coronavirus still on the rampage worldwide. But we expect a rapid return to more normal economic growth to start by midyear.
The market’s sunny outlook throughout a grim period of history has generated many skeptics. Some areas are indeed frothy, but we see enough justification for the market’s ongoing optimism to maintain our target weighting to higher-risk asserts. We anticipate further changes away from trends that produced an extremely lopsided market last year – a market that favored U.S. stocks and in particular technology and growth-oriented stocks. We think value and international stocks will participate more in the markets’ advance this year. Value stocks show more strength in the first years of economic recoveries and should gain momentum as vaccinations spread and earnings and growth rise. International stocks should continue to narrow the gap on their domestic peers, benefiting from lower valuations and a weaker dollar. We do however foresee a normal amount of volatility in 2021, but with select opportunities and further gains overall.
CHANGES IN WASHINGTON
With the elections now behind us, it removes some uncertainty for markets now that one party controls both the White House and Congress for the first time in two years – the first time in a decade for Democrats. It also greases the legislative skids for increased spending. The Democrats’ agenda targets a more than trillion-dollar outlay for stimulus as well as attempts at tax increases after Covid is contained. But their very slim majority in Congress means any efforts at bold initiatives will be constrained. Although tax hikes and the mounting national debt could be concerns for 2022 and beyond, the near-term increased spending will boost growth in 2021 and assist in reviving the economy.
The U.S. economic recovery has recently lost momentum. But we believe it will endure the deadly COVID-19 surges that have prompted renewed closures and restrictions. Widespread vaccinations, more fiscal stimulus and pent-up consumer and business demand should help fuel a return to normal economic activity levels in the second half of this year.
You can find our full commentary here. Thank you for watching – please stay healthy.
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