As we enter a new-year “2021”, the incessantly hyped vaccines bring hopes of reopening and a return to normal (like flipping a light switch) but the reality is that markets and the economy will not return to its pre-Covid-19 world anytime soon as they are constantly evolving. That evolution creates for us some decent money-making opportunities.
Here are a few of my thoughts on potential trends that I
expect to affect the markets in 2021 and beyond; please remember that post-pandemic
economies will look far different:
History tells us that every
recession brings economic scarring. Given the scale of the Great Covid-19
Recession (GCR), this time will not be any different.
Proactive fiscal policy and FED policies have been a pillar of the recovery and we should expect structurally higher spending (free-flowing stimulus) going forward. There is a real possibility that significant higher deficit spending will likely result in higher interest rates, higher inflation, and sharper and shorter business cycles, all of which come with higher volatility and a broader role for active central planner intervention management.
One powerful trend due to Covid-19 is the deployment of stay-at-home technology to disrupt existing business models. We have seen these secular trends continue with robust demand for investment in AI, automation, and industrial supportive software. The application of various new technologies in response to the Covid-19 pandemic has led to new ways of operating that made firms more efficient and able to some extent protect their margins. I suspect that these efficiency gains are just the tip of the iceberg as the continued dissemination of technology across industries boosts productivity for years to come; too bad the gains will not filter down to the working class.
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