Next Wednesday, January 20, Joe Biden will be sworn in as the 46th President of the United States, and we are hopeful that Inauguration Day will serve as a platform for a more united country. However, before this transition of power occurs, we evaluate the economic and market performance that has occurred over the last four years under President Trump and provide some context as to how the results compare to those of prior presidents. Overall, the performance has been mixed with healthy equity gains and tepid economic growth despite record increases in the size of both the national debt and the Federal Reserve’s (Fed) balance sheet. In addition, given that we ‘inaugurated’ our Ten Themes for 2021 this week, we address a few macro risks that could unsettle our optimistic outlook for the equity market. These include the likelihood and timing of tax policy changes, the potential for premature Fed quantitative easing (QE) tapering, and growing geopolitical risks.
While we foresee that volatility will be lower in 2021 versus 2020, primarily as the world recovers from one of the most severe ‘Black Swan’ events in history—COVID-19—there are still a few dynamics that could unsettle our favorable outlook for the upcoming year.
All expressions of opinion reflect the judgment of Raymond James & Associates, Inc., and are subject to change. Information has been obtained from sources considered reliable, but we do not guarantee that the material presented is accurate or that it provides a complete description of the securities, markets or developments mentioned. There is no assurance any of the trends mentioned will continue or that any of the forecasts mentioned will occur. Economic and market conditions are subject to change. Investing involves risk including the possible loss of capital. International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets. Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. Past performance may not be indicative of future results.