Predictions for a new year: Bullish markets, family events and sticky social distancing?
February 1, 2021
We’ve made it. After an incredibly difficult year that challenged the very fabric of our society, left nearly 400,000 dead and millions unemployed, we’ve set sail to 2020.
As we enter 2021, the world seems poised to settle down. In the waning days of 2020, regulators at the Food and Drug Administration, the country’s highest medical regulator, approved for emergency use COVID-19 vaccines from Pfizer and Moderna. Now, we face one of the defining logistical challenges of our lifetime, as state, local and private actors coordinate to ship and distribute millions of vials of the life-saving vaccines to cities and towns across the US.
Many hope that, as the distribution of the vaccines becomes more widespread, life will eventually return to normal—caseloads will fall, businesses will reopen in full, and life will begin again. I’m confident this will be the case—but we’re not there yet.
Just the other week, the Department of Labor announced that more than 140,000 people lost their jobs in December. There is still a dire need for economic stimulus. Businesses remain shuttered in many of the nation’s largest cities. COVID-19 caseloads have reached all-time highs around the country. Earlier this week, more than 4,000 Americans died of the coronavirus.
Things will get better, but work remains to be done. It is this paradigm—hope for the long-term and trepidation for the immediate days ahead—that informs my business outlook for this year. Here are a few trends I think will transpire over the coming 12 months.
Stocks Soar: A Growing Disparity
A major storyline of the COVID-era economy has been the profound disconnect between the stock market and the labor market. Just last week, at a time when the economy again contracted by hundreds of thousands of jobs, the Dow Jones Industrial Average surpassed 31,000—a remarkable figure unthinkable just years before, never mind during a global pandemic.
It is likely that we will see the market continue to rally this coming year. So long as the Federal Reserve, America’s central bank, continues to keep interest rates low and inject liquidity into financial markets, investors will have a driving incentive to put their faith—and their money—into the market, driving up demand and stock prices.
Given the dire state of the labor market, it’s unlikely the Federal Open Market Committee is eyeing a rate hike anytime soon, continuing to breathe wind into this unorthodox recession-era market.
The Economy of Experiences Makes A Comeback
When herd immunity finally does kick in and the profile of the economy reverts more closely to normal, there will be significant consumer demand to spend money on experiences—novel, inventive family outings that can be shared on social media and form the backbone of lasting social memories.
Thanks to the efforts of online retailers, we’ve all been able to purchase things during the pandemic; it’s the experiences—travel, restaurants, nights out—that have fallen into short supply. Demand for these activities hasn’t evaporated, only supply has. And as soon as is deemed safe, this industry will come roaring back.
Is Social Distancing Sticky?
In economics, the adjective “sticky” is used to describe goods, services, markets or phenomena that change little in response to prevailing market conditions.
The pandemic and its attendant consequences have been indelibly difficult, but I project some aspects of the last year will stick around.
Masks, for example, could be here to stay. Sure, vaccines may wipe out the threat of COVID, but masks have proven to be effective tools in keeping influenza, the common cold, and other respiratory bugs at bay. The pandemic has shown that the logic behind masks is intuitive—if you’re feeling sick, why wouldn’t you wear a mask to avoid spreading contagions to the public? A year ago, few of us thought that way, but it is reasonable to suggest that, moving forward, masks could be flu season mainstays.
I anticipate that mask-wearing will not be the only way in which consumer behavior has changed. Seeing just how sticky the sacrifices we’ve come to live by in the COVID era end up being will be one of the great economic questions before us in the year of hope and renewal.