Capitol Crisis and the Markets, Manufacturing Recovery, More Taxes Ahead?
The beginning of a new year is the perfect time for investors to start thinking about possible investment themes. In today’s Steady Investor, we take look at three to consider for 2021:
- Economic effects of the crisis on Capitol Hill
- More taxes and spending in the future
- Factories showing strong fundamentals
Crisis on Capitol Hill – All readers are aware of the disturbing and unfortunate events that unfolded at the Capitol this week. There is much to be said about what happened. But our focus here will be on how the storming of the Capitol may affect the markets and the economy, both in the short and the long-term. In the short-term, we might reasonably expect higher levels of volatility as uncertainty remains high over the next few weeks. Higher uncertainty also tends to give way to skittish businesses and consumers, in terms of private fixed investment and consumption. To that end, we may expect a slight dip in economic activity in the short-term, as reflected in Q1 numbers (which we expected to be fairly weak anyway). Longer-term, however, we do not expect the civil unrest will lead to a reversal of our forecast for a strong economic and corporate earnings recovery in the second half of the year. The events of last week were unprecedented, but the U.S. has endured far worse, in our view. Two World Wars, a Great Depression, four presidential assassinations, Vietnam, 9/11, the Great Recession, the storming of the U.S. Capitol – the U.S. economy is resilient. In our view, now is a time for investors to redouble efforts to fully separate your emotions about the political state of the country from your investment decision-making process.
As we adjust to the new year, we are witnessing how pandemic and political related events can affect the market significantly. With that being said, we understand that investors who are trying to build their retirement portfolio may be experiencing concerns about future uncertainties.
Navigating through this challenging time is difficult, but we still believe it is possible to avoid the damage of economic downturns and achieve your retirement goals. However, achieving these goals involves some work: Defining your investing objectives, determining your asset allocation, managing investments over time.
To help you do this, we are offering readers our free guide that offers a step-by-step blueprint of our customized investing process to potentially help you build a sound retirement portfolio of your own.
If you have $500,000 or more to invest, get this guide to learn our ideas on building and maintaining a retirement portfolio to potentially achieve your long-term goals.
Get our FREE guide: 7 Secrets to Building the Ultimate DIY Retirement Portfolio1
More Taxes, More Spending Seem Likely in Years Ahead – With the two Georgia Senate seats going to Democrats, it appears more likely the U.S. economy will be dealt more fiscal support and likely higher top tax rates and capital gains rates. However, a 50/50 split in the Senate is certainly not enough to enact massive spending packages and tax hikes, and history tells us that posturing during a campaign cycle usually evolves into more modest proposals that take several months to become law. Even still, we might reasonably expect looser fiscal policy with Democrats controlling the House, Senate, and White House. Whether more spending is needed – and how much – is debatable. But the stock markets response historically to fiscal stimulus has almost always been positive.
Factories Showing Strong Fundamentals – Politics took a front seat last week with major events unfolding. But as we mentioned in our first story, investors should remember that the economy and the political realm often operate on completely different planes, independent of one another. One underappreciated story last week charted the fundamentals of factories across the U.S., Asia, and Europe, which boosted output across the board on the heels of new orders and a resurgence in global trade. The global manufacturing sector has seen fairly steady recovery since last spring, as opposed to the services sector which has struggled to break through as the pandemic worsens. This divergence of strength, with manufacturing outperforming services, may be a theme that persists in the first half of 2021.2
These influential events can affect the economy in many different ways. As we wait to see how the market will be impacted, there are things you can do to protect your investments and create a retirement portfolio that meets your financial goals. To help you do this, I recommend reading our guide, 7 Secrets to Building the Ultimate DIY Retirement Portfolio.6 It provides a step-by-step blueprint of our customized investing process to potentially help you build a sound retirement portfolio of your own and pursue long-term investing success.
If you have $500,000 or more to invest, get this guide to learn our ideas on the step-by-step process to building and maintaining a retirement portfolio that will potentially help you reach your goals and enjoy a secure retirement.
2 Wall Street Journal. January 4, 2020. https://www.wsj.com/articles/manufacturers-overcame-covid-19-setbacks-to-end-2020-on-high-note-11609755628
3 ZIM may amend or rescind the “7 Secrets to Building the Ultimate DIY Retirement Portfolio” guide for any reason and at ZIM’s discretion.
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