Market Perspective - The New Year: Partly Chaotic with a Chance for Opportunity

Happy New Year to our clients and readers. It took a few weeks before gaining enough inspiration to write our first Market Perspectives of 2021.  The noise of politics, social unrest, pandemics, and the threat of losing free speech can leave you at a loss for words. Frankly, America has become entrenched based on agendas, ideology, and rancor being spewed from the highest offices. The very morals and ethics on which our democratic republic was created have been defenestrated in recent months, maybe years. Amid this landscape, finding something to talk about is not difficult, writing it in such a way that provides hope of solidarity, however, is nearly impossible. With that in mind, I will simply deliver the facts in a context that illuminates and educates.

2020 was filled with more twists and turns than anyone imagined.  The year began with a presidential impeachment, one that seemed unusually protracted and based on equivocal evidence.  COVID-19 quickly morphed into a destructive pandemic. Social unrest ignited; protests in nearly every major city turned to violence, riots, looting, and vandalism. Since the presidential election, extraordinary events have persisted, including an ominous turn on January 6, 2021, as rioters stormed and occupied the Capitol building in Washington, DC.  Immediately, the narrative continued and the current president was blamed for the reprehensible conduct of hundreds. Immediately following this event, another impeachment was impetuously delivered, long before anyone considered the facts.  The very assault on a sitting president calls into question our own system of justice; innocent until proven guilty. Political factions tossed out words like insurrection and fascism. If nothing else, this is a good time to brush-up on history.  Fascism is something that no living American has experienced. On the contrary, we have no idea!

A few weeks later, optimism about new stimulus measures from the Biden administration outweighed weaker-than-expected employment data. It is here we begin to isolate how the market is reacting and illuminate why it continues moving higher.  Jobless claims last week were reported as 965,000, up from 784,000 a week earlier and well above the Bloomberg consensus forecast of 789,000. The reading was the highest since August and may have been driven in part by the government’s recent renewal of supplemental employment benefits. But stocks were insouciant as president-elect Biden announced his proposed $1.9 trillion of stimulus. The trend of borrowing money to temporarily assuage fear will become more and more difficult to manage. Perhaps a little perspective here is necessary. US Debt is nearly $28 trillion dollars (not including Biden’s proposed spending) or approximately $222,000 per taxpayer. Think taxes aren’t going up? At some point, the right balance of taxes, interest rates, and government spending will be necessary to avert running off the cliff.

None of this sounds like a time to celebrate. Just days away from the inauguration of the 46th president of the United States, Democrats will do well to immediately move towards a continuation of trying to rebuild the COVID-battered economy. Lest we forget, much of the economy was closed last year and state governors delivered ambiguous language that left many businesses in dire straits.  Emerging as a strong and sustainable economy will take time and a deft touch from political leadership. Now, add to that a divided nation where many believe the election was rigged, unifying seems more of an ingratiating tactic versus reality.  In fact, many believe President Trump is far from moving out of the picture. From an investor’s point of view, gridlock in Washington, where a single party doesn’t control the presidency and both houses of Congress, becomes a more attractive scenario.

The Democrats currently have hegemony, but only by the slimmest majority in the Senate and with a smaller majority in the House com