Happy New Year! Stocks finished out 2020 on a positive note, as major U.S. indices moved higher during the truncated holiday week trading. President Trump signed the most recent Covid-19 relief bill into law at the beginning of the week. This bill will help to provide support to businesses and individuals until widespread deployment of the vaccine can be completed (hopefully) later this spring.
For the week, the S&P 500 Index closed up 1.4%, while the Dow Jones Industrial Average rose 1.4%. For 2020, the S&P gained 16.3% year over year, while the Dow finished up 7.3% from 2019. Unemployment data continued to improve: first-time unemployment claims fell more than expected to 787,000, while continuing claims continued their decline, to a total of 5.2 million.
Stocks enter 2021 riding at record-high levels, with hope abounding that an end to the pandemic within the first half of the year will lead to higher economic growth and full employment. While this is still our expectation, we caution that the next few months are still ripe for volatile market activity. Of primary concern, potential dangers from the recently discovered variant strain of the virus remain unclear. Additionally, the extremely contentious political climate, potential logistical complications for distributing the vaccine, and continued economic restrictions in select locations worldwide all threaten stocks in the short term.
The Oxford/AstraZeneca vaccine was approved for emergency use in the United Kingdom this week. Hope is high for its effectiveness because it is less costly than other approved vaccines and does not require ultra-low storage temperatures. Additionally, the Brexit trade agreement negotiated last week passed through Parliament – mitigating a major impediment to continued European recovery in the new year.
Bitcoin’s rise during the month of December has been strong and we’ve had multiple inquiries from clients about investing in the digital currency. While a limited investment could be appropriate as part of your overall portfolio strategy, it is prudent to consider the extreme fluctuations over the history of Bitcoin’s existence. As with any highly volatile investment, taking too concentrated of a position can be very detrimental to your financial health if prices reverse sharply.
We look forward to continue partnering with you in 2021 and are committed to providing timely and actionable communication. Check out recent NBC WDIV Channel 4 interviews with Nathan Mersereau for tips to help get your finances organized. From considering Roth IRA conversions in light of anticipated future tax increases, to calculating net worth and bringing your financial team together, to updating your estate plan, there are many areas to review. You also might be interested in two articles offering tips on leveraging health savings accounts to save for retirement, while another article covers the ins and outs of avoiding cyber scams. As always, please reach out with any questions. Let’s make a plan for 2021!