By Paul S. McNulty, CFP®
It felt like 2020 would never end, so it’s hard to believe we’re already halfway through 2021. And having been reminded of the harsh reality that we cannot predict the future, most of us entered the new year with a bit of apprehension. After all, almost every single aspect of our lives was turned upside down when COVID-19 came into play: work, school, family, shopping, eating (and the list goes on).
Although we didn’t know what to expect in 2021, it seems as though we’re finally on our way to putting the coronavirus behind us. Now is the perfect time to take stock of what’s happened so far in 2021 as we continue recovering—emotionally and economically—from the pandemic.
Stock Market Performance
As vaccine rollouts have allowed many businesses to return to normal, some experts believe we may be entering a booming economy. (1) Stock market performance has been mildly volatile in the first half of this year with an overall trend toward growth. The S&P 500 reached its highest level this year on May 7, with a year-to-date return of 14% as of June 4. (2) The Dow Jones has also shown overall growth this year and is up 15% as of June 4. (3)
Meanwhile, the NASDAQ has shown greater volatility with a yearly low of -2.17% in early March, up to 9.7% at the end of April, and ending at 8.79% as of June 4. (4) Many experts have warned that while they are optimistic about market performance in 2021, that performance will likely be riddled with volatility throughout 2021 and in the coming years. (5)
A Shaky Return To Normal Employment Levels
It has been generally expected that as businesses reopen to full capacity, the number of unemployment claims and levels of unemployment will return to normal. As many of us have seen in the news, however, this is currently not the case. (6) Along with other businesses in the hospitality industry, restaurants are especially struggling to replace their workers and remain understaffed in the face of increasing demand from consumers.
Some commentators believe workers are reluctant to return to work because of continued unemployment assistance from federal and state governments. Others argue that many workers are unable to return to work yet because they are still wary of the coronavirus, are unable to find affordable childcare, or now have the time to look for more stable, higher-paying work outside of the hospitality industry.
Whatever the reason for the worker shortage, worker benefits and wages may undergo drastic changes in 2021 and beyond as the economy returns to normal. In any case, getting workers back into the workforce remains a key component of the U.S. recovery plan.
Interest Rates & The Federal Reserve
Interest rates continue to remain low, as the Federal Reserve has promised. In an effort to encourage consumers to keep borrowing, the Fed has kept interest rates near zero since the onset of the pandemic. They have stated they will likely not raise rates again until 2023, when it is more likely that inflation rates will reach desired targets. (7)
For now, the near-zero interest rates may be attracting first-time homebuyers who have been able to weather the economic pressures from the pandemic. However, home prices have surged 13.2% over the past year, (8) igniting some fears that a housing bubble may be looming.
How Should You Respond?
The global pandemic reminded us of some valuable (and somewhat obvious) life lessons: time spent with loved ones should be cherished, washing hands prevents the spread of germs, and having a strong financial plan in place can help when disaster strikes.
We’ve always said that market performance is impossible to predict with accuracy, and 2020 and 2021 have shown us that market performance may be impossible to predict at all. Although we never know what lies ahead, that shouldn’t prevent us from taking the steps to protect ourselves and pursue financial freedom.
Now more than ever it’s important to make wise financial decisions that give you confidence about your future and move you toward your goals. At Boston Metro Advisor, we specialize in helping our clients pursue financial independence using sound financial strategies that align your day-to-day decisions with your long-term financial plan. If you’d like to see how we can help you, send me an email at [email protected] or call me at (781) 995-0253.
About Paul
Paul McNulty is the founder of Boston Metro Advisor with over 20 years of experience helping people navigate the ups and downs of the economy toward the financial future they envision. His education consists of a Bachelor of Science in business administration from the University of Rhode Island and the CERTIFIED FINANCIAL PLANNER™ (CFP®) professional designation.
Paul’s experience and education have made him a multi-faceted professional capable of assisting people with virtually all their financial needs. His services include every facet of retirement planning, from 401(k) rollover services and income planning to wealth management and estate planning. Paul has been active in his community over the years as a youth sports coach. When he’s not spending time with his wife, Cindy, and their two children, who are both recent college graduates, Paul enjoys reading, playing golf, and fishing. Learn more about Paul by connecting with him on LinkedIn.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
___________________
(1) https://www.cnbc.com/2021/04/09/the-economy-is-on-the-cusp-of-a-major-boom-and-economists-believe-it-could-last.html
(2) https://www.google.com/finance/quote/.INX:INDEXSP?sa=X&ved=2ahUKEwjI5a-z8oDxAhWbXc0KHQ2PCWYQ3ecFMAB6BAgiEBo&window=YTD
(3) https://www.google.com/finance/quote/.DJI:INDEXDJX?window=YTD
(4) https://www.google.com/finance/quote/.IXIC:INDEXNASDAQ?window=YTD
(5) https://www.morganstanley.com/ideas/stock-market-outlook-2021
(6) https://thehill.com/policy/finance/economy/556235-chamber-of-commerce-worker-shortage-crisis-deepening
(7) https://apnews.com/article/fed-expects-key-rates-near-zero-through-2023-9b9a335a1ce05d69fc97a1d6197371ab#:~:text=WASHINGTON%20(AP)%20%E2%80%94%20The%20Federal,markets%20about%20potentially%20higher%20inflation
(8) https://www.carsonwealth.com/insights/market-commentary/market-commentary-home-prices-surge-over-previous-year-disposable-income-dips/