Stimulus Bill Passes, Investor Optimism is Peaking, China’s Big Tech Backlash
We have finally entered the new year! This is the perfect time for investors to start thinking about possible investment themes for 2021. In today’s Steady Investor, we take look at three to consider:
- Provisions of the stimulus bill
- Signs of too much optimism in the retail brokerage market
- Headwinds against Big Tech are building in China
The $900 Billion Stimulus Bill Becomes Law – After much political posturing and several weeks of negotiations, the next round of fiscal stimulus was signed into law last week. Here are a few of the key stimulus provisions in the bill:
- $600 stimulus check for Americans with up to $75,000 in adjusted gross income (2019 earnings), including $600 per child;
- A revival of enhanced federal jobless benefits for 11 weeks, with up to an additional $300 per week;
- $82 billion for education funding, with about $54 billion going to K-12 schools and $23 billion going to colleges and universities;
- $7 billion for expanding access to high-speed internet connections, about 50% of which will be used to help low-income families pay monthly internet bills;
- $285 billion set aside for additional Paycheck Protection Program (PPP) loans for small businesses;
- $35 billion to fund wind, solar, and other clean
- A federal moratorium on evictions, extended by one month to January 31.1
The new year brings a fresh start! As investors are still uncertain about the market performance within the next few months, we understand how difficult it can be to make future financial decisions – especially for those who are trying to build their retirement portfolio. Still, that doesn’t mean you can’t make the most of this new phase.
To help you do this, we are offering readers our free guide that provides a step-by-step blueprint to potentially help you build a sound retirement portfolio in 2021. This guide offers you a checklist of the most important financial, tax, and investment considerations for new retirees, with detailed explanations to help you prepare for this new stage in your life.
If you have $500,000 or more to invest, get our free guide today!
Is Optimism Building Too Fast? The stock market staged a strong rally off the spring lows, with frequent stories of 100+% gains and more recent news about explosive returns in cryptocurrency. From an investment standpoint, the strength across many asset classes has led to a surge in “FOMO,” or fear of missing out on returns. Many investors are rushing into the markets, pushing sentiment from pessimistic in the spring to optimistic today. Investors borrowed a record $722.1 billion on margin through November 2020, a signal that risk-taking may be approaching a crescendo. Optimism and overt risk-taking combined have been ominous for markets, as historically they have tended to result in corrections, pullbacks, and bouts of volatility (see 2000 and 2008 for examples). We’re also seeing signs of too much optimism in the retail brokerage market, with individual investors opening more than 10 million new brokerage accounts in 2020 – a record. The Wall Street Journal also reported that the online trading platform Robinhood saw 500,000 new downloads in December, as well as upticks in volume on brokerages like TD Ameritrade and E*Trade. If history serves as any indication, we might reasonably expect volatility in the not-too-distant future.3
Headwinds Against Big Tech are Building in China Too – Alibaba was China’s most valuable company throughout most of 2020, and planned to finish the year with a bang by rolling out its much-anticipated Ant Financial IPO. Then Chinese regulators stepped in.In a crushing blow to both companies, China’s top commerce regulator announced an investigation into Alibaba’s business practices, alleging the company may be abusing its dominant market position for monopolistic purposes. A few days later, the Chinese central bank (the PBOC) issued a statement criticizing Ant Financial’s business practices, ordering the company to focus on its less-lucrative digital-payments business. Alibaba owns one-third of Ant, and both were founded by Jack Ma.It is unclear whether China’s actions against Alibaba and Ant were tied to the government’s disapproval of Jack Ma’s recent statements criticizing China’s oversight of businesses. Retaliation seems a likely motive for the punitive measures against Alibaba, and Nomura research analysts note that China may also be using Alibaba’s case to send a warning shot to other dominant technology companies acting anti-competitively. Much like in the U.S., regulatory headwinds are building against Big Tech.4
Planning Retirement in 2021 – Whether you’ve been planning to retire in 2021 for a while, or the chaotic events of 2020 have motivated or forced that decision, now is the time to get ready. Retirement marks the end of one life stage, but also the beginning of another—full of new adventures and opportunities. To guide you through this new phase, we recommend a thorough review of your financial and investment situation so you can make any adjustments necessary to keep your plans and lifestyle on track.
If you have $500,000 or more to invest and want to understand your retirement options, get our guide, Looking to Retire in 2021.4 Simply click on the link below to get your copy today!
2 Zacks Investment Management reserves the right to amend the terms or rescind the free How the Looking to Retire in 2021? Here are 4 Things to Consider First offer at any time and for any reason at its discretion.
3 Wall Street Journal. December 27, 2020. https://www.wsj.com/articles/investors-double-down-on-stocks-pushing-margin-debt-to-record-11609077600?mod=djem10point
4 Wall Street Journal. December 28, 2020. https://www.wsj.com/articles/alibaba-shares-tumble-again-after-chinese-regulators-tighten-screws-on-ant-group-11609155921?mod=djem10point
5 Zacks Investment Management reserves the right to amend the terms or rescind the free How the Looking to Retire in 2021? Here are 4 Things to Consider First offer at any time and for any reason at its discretion.
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