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An Economy on Steroids

Barron’s recently interviewed me about my projections for the S&P 500® Index and the market for 2021. They asked what I thought the stock market would do next year—my “Fearless Forecast” for 2021. In my pre-pandemic 2020 Fearless Forecast, I predicted the Dow Jones Industrial Average® would reach 31,000, which actually happened. So, what did I say to Barron’s? The title of this article should give you an idea.

If you’ve been reading this blog or listening to my radio show, you know I have believed the health of the economy has been dependent on continued stimulus packages. In my view, the new stimulus plans and the COVID-19 vaccine is making investors more confident, and consumers may feel a little safer about spending more. However, tens of millions of people lost their jobs earlier this year, and in the week ending November 28, 712,000 people filed first-time unemployment claims. Those people—and the rest of the unemployed—need to have the ability to spend, too.

I think the combination of continued stimulus packages and the vaccine could push the Dow as high as 35,000 in 2021. I know that is a bold prediction but look at how the market has performed amid the worst economic conditions we’ve seen since the Great Depression—not to mention an unprecedented pandemic and arguably the most contentious and downright wacky political conditions ever.

Once the pandemic is under control, I believe things could change in a lot of ways. I believe we will soon see the birth of a new entrepreneurial age. During transitional periods like this, certain industries often die, and new ones replace them: new technologies, new entrepreneurs, and new exciting ways of doing business. But transition periods can also be dicey, and we don’t know how much underlying structural economic damage this pandemic has truly caused. I think we’ll see some instability next year, but also a nice rise in the market.

Overall, I believe the stock market will continue its upward trajectory, but I also think risk could be high right now. And I believe calculating your risk is an important factor in financial planning for all investors and doubly important for retirees. Once you are retired, I believe you should only take as much risk as is necessary to accomplish your financial goals.

Our defensive Invest and Protect™ strategy is designed for you to benefit from good market conditions like we are seeing right now, but also preserve your assets when we see what we believe are indicators of a downward trend that could have a severe impact on your financial future. We believe our strategy allows you to participate in the market’s unlimited upside with what we believe is a tolerable downside. If you’d like to learn more, schedule a free, no-obligation consultation with one of our credentialed Retirement Planners. We’d love to talk to you.

Ken Moraif, CFP®, MBA
Senior Advisor at Retirement
Planners of America

Author of Buy, Hold, and SELL! Author Page