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Market Comment from Pacific Wealth Management (Jan '21)

Investing Insights

  • Aggressive monetary and fiscal response from Central Banks and governments around the world helped stock markets rebound from the fastest, sharpest, and shortest bear market in history
  • Presently the financial markets are reacting positively to the domestic political realignment while anticipating a significantly larger fiscal COVID spending relief response, which could fuel economic growth more robustly in the short term 
  • Financial markets are likely to experience more volatility in the months ahead as present optimism for a future economic rebound has resulted in equity prices rapidly rising in anticipation
We hope you and your family had an enjoyable and healthy holiday.

2020 will certainly go down in history as a year the world will never forget. The COVID-19 pandemic upended life as we knew it and briefly caused our global economy to grind to a halt. The humanitarian crisis continues to be devastating. After a record high on February 19th last year, U.S. stocks declined 35% by March 23rd making it the fastest, sharpest, and shortest bear market in history. Fortunately, the very aggressive monetary and fiscal response from Central Banks and governments around the world helped stock markets rebound and finish the year with healthy gains. Over the course of the year, we actively realigned your investments to participate effectively in the incredible financial market recovery to record highs, all within a pandemic. We are pleased our investment portfolios generated solid returns again in 2020.

The bitter November election resulted in Joe Biden being elected over incumbent Donald Trump. Unfortunately, American political division continues to be pervasive, as illuminated again in this week’s unrest in Washington D.C. The blue wave, many expected in the fall, finally materialized this week when Georgia ultimately delivered a Senate majority to the Democrats. With the Democrats controlling all of Congress and the White House, Joe Biden will be able to enact a more liberal policy agenda. Initially, the financial markets are reacting positively while anticipating a significantly larger fiscal COVID spending relief response, which could fuel economic growth more robustly in the short term.

With 2021 now upon us, the world is becoming increasingly optimistic we will be seeing better days ahead. Incredibly, pharmaceutical companies have been able to develop viable vaccines to combat the Coronavirus in just 9 months, which previously took years to create, test, and dispense to the populace.

 As the world gets inoculated and economies around the globe reopen, business and consumer confidence should progressively increase and fuel growth from recovery into expansion. With optimism and valuations at these higher levels, we are expecting financial markets to experience more volatility in the months ahead. Central Bank’s ongoing highly accommodative global monetary policy and embrace of low-interest rates will be significantly more impactful on the financial markets than our recent political shift in American politics.

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