What kind of year will 2021 be, economically?
One historic portent has always been: “As goes January, so goes the year.”
Forecasting the future is difficult at best. Nonetheless, investors large and small naturally search for any indication of what the future will bring.
Over the years, investors have learned that trends noted in January tend to match what happens the rest of the year. This January, stocks declined. Your investments were worth more on December 31st than on January 31st.
Statistics, of course, are not proof. But are there other factors to be aware of?
Indubitably. The country has a new President. That alone is always a big factor.
For many Presidents, their actions during the first two years tend to be more detrimental to the economy. In the third and fourth years, a President will typically make decisions that cause an economic upswing, as part of his effort to be re-elected for a second term.
President Biden has already taken a number of actions that will affect investments and the stock market. The most noteworthy was the withdrawal of permits for the construction of the Keystone pipeline. That move alone cost tens of thousands of American jobs. Biden also re-entered the Paris Climate Accords. As some have quipped, these moves will “Make OPEC Great Again”. Russia is surely just as pleased as OPEC. American jobs will go overseas, and America’s workers will be hurt.
Expect higher prices at the gas pumps, and more lost jobs as America’s oil production slumps. Further, watch for declines in other sectors of the economy affected by that slump.
Judge carefully. The market rebounded in the first week of February. People who hated Trump are still happy, but let’s see how they feel by the end of the year.