2020 has widely been panned as one of the worst years in modern history. It has
seen a global pandemic shut down the entire economy, separate families, and claim
millions of lives across the globe. Although the new year appears to be more
optimistic in terms of regaining some normality, the virus’s lingering effects still
remain, framing the stock market forecast for 2021.
The vaccine will enable individuals to return to in-person business and learning,
causing companies that benefited from the stay-at-home economy like Zoom Video
Communications to lose popularity. Although user numbers may take a hit, experts
expect habits formed during the pandemic, like delivery services, home workouts,
and online shopping, to persist during the recovery. However, in Zoom’s case, it is
quite doubtful that the company will continue to sustain its quarterly earnings growth
in excess of 8,884% like it did in 2020.
The vaccine could undoubtedly work as a positive catalyst for those companies
within industries that have been hit the hardest by the Covid-19 pandemic such as
hotels, airlines, retailers, and restaurants. These types of stocks could potentially be
bought at a discounted rate to be sold for a profit later on in the year once the
economy reopens again fully. In fact, American Express, the credit card primarily
used by business travellers, is one of the many reopening stocks traders are
encouraged to keep an eye out for. Although business travel may not return to levels
seen before the pandemic, it is certainly going to get a lot better once a Covid-19
vaccine is widely available.
2020 continued to demonstrate the urgency of the ongoing global warming climate,
leading analysts to peg environmental, social and governance (ESG) investing that is
buying stocks in companies that do not contribute to the world’s problems and
moving away from those that do, as one of the hottest trends of the new year. ESG
is also becoming dramatically more popular among younger investors, so it’ll be a
major force in 2021 and beyond.
The S&P 500 Index
Given the uncertainty related to Covid-19, and the pace of economic recovery in the
U.S. and globally, it has become increasingly more difficult to anticipate the future of
the S&P 500 Index. Moreover, despite the pandemic the five largest components of
the S&P, Apple, Microsoft, Amazon, Facebook, and Alphabet all performed
extremely well in 2020. A narrow majority of market strategists believe that this will
continue to be the case due to the increase in global economic activity, predicting the
S&P 500 to rise between 4,000 and 4,500 this year.
Making predictions is no easy feat at the best of times, but especially after a year of
upheaval. To date, the expert general consensus appears to be that the market will
weather the storm. Analysts are riding the waves of optimism thanks to the
distribution of the vaccine promising the reopening of the economy. However, if we
have learned anything from the last year it is that nothing is for certain.
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