Road to Recovery
The Fed and International Monetary Fund (IMF) both recently released statements on the 2021 economy, which provide a dose of much-needed good news. But we have to insert the caveat that if 2020 taught investors anything, it was to stick with their investing discipline and be prepared for the unexpected.
The Fed said in its post-FOMC meeting statement on January 27, 2021, that “the pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic.” Nevertheless, the Fed also noted that “the path of the economy will depend significantly on ... progress on vaccinations”. The Fed also removed language that the coronavirus crisis posed considerable risks specifically “over the medium term”.
On January 20, 2021, the IMF raised its forecast for global growth this year, betting the rollout of coronavirus vaccines and more fiscal stimulus will offset the immediate challenge posed by the pandemic. The IMF predicts global gross domestic product will rise 5.5% in 2021, faster than the 5.2% projected in October 2020. Such growth would match 2007 as the best in four decades of data and follow 3.5% contraction last year, which is the worst peacetime decline since the Great Depression.
Now that vaccines are being administered and new coronavirus cases are falling, prompting states like California and New York to start easing restrictions, activity and employment should rebound, particularly with the benefit of fiscal stimulus packages.
This is all welcomed good news. What does this mean for investors? 2020 should have taught investors that well-established principles, like investing for the long-term with a low-cost, diversified portfolio and checking your investment balance occasionally are the best advice. Better to have a well-diversified portfolio to weather whatever happens in the markets than trying to predict what’s going to happen next.
As the economy recovers there will likely be certain sectors that will rally and others that will fade. The markets may be a bit of a roller-coaster ride as businesses reopen. Predictions are hard, so the most important advice is to avoid the temptation to over-focus on the short term.
Instead focus on your goals. Make changes if your goals and/or situation has significantly changed. If you found your portfolio whipsawed and stress you out too much then make tweaks to your investment policy and portfolio.
It’s comforting that officials are more confident that the introduction of highly effective vaccines offers the possibility of a return to normalcy. In the meantime, be sure you are prepared for anything. Please contact us to help you examine your situation and make any adjustments as needed.
Be well and safe,
Important Disclosures:
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve. Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.
Toroso Advisors is a division of Toroso Investments, LLC (“Toroso”), which is a Delaware limited liability company founded in March of 2012. Toroso also operates under the following “doing business as” or “DBA” name: Toroso Asset Management.
Toroso is dedicated to understanding, researching and managing assets within the expanding exchange-traded fund (ETF) universe. Toroso’s investment philosophy emulates many of the values and benefits inherent in ETFs such as: transparency, liquidity and tax efficiency. Toroso offers fee-only discretionary and non-discretionary investment management services to individuals; high net worth individuals, including family offices; and institutions, which primarily include qualified pension plans, Taft-Hartley plans, and 401(k) plans. Additionally, Toroso provides fee-only non-discretionary pension consulting services to corporate retirement plans and non-discretionary outsourced chief investment officer (OCIO) consulting services to financial advisors. Furthermore, Toroso provides investment advisory and investment sub-advisory services to several ETFs, some of which also receive non-advisory services from its affiliated firm, Tidal ETF Services LLC. Toroso generally acts under the DBA name “Toroso Asset Management” when providing the foregoing services.