2021January 6, 2021 -
Categorized in: IAG News
Rarely is a new year welcomed with more enthusiasm and less celebration than 2021. Good riddance to 2020, but the only people watching the ball drop in Times Square were security personnel.
My sense is that people are embracing 2021 with such enthusiasm because they fully expect a return to normal by the end of the year (if not sooner). I can certainly understand the appeal of not wearing masks, freely gathering with friends and family, going to a restaurant, attending a baseball game in the summer, and all of the other normal activities that disappeared in 2020.
All of this optimism certainly lifted the financial markets at the end of 2020. However,
a strange bit of logic, 2020’s closing on a high note makes me less optimistic about 2021.
Do you remember 2018? The financial markets peaked in September and trended downward through December, culminating in a market bottom on Christmas Eve. That persistent bout of pessimism and fear at year-end set the table for impressive returns the following calendar year.
Of course, past performance is no indication of future results. However, I would be much more optimistic about the potential returns for the financial markets in 2021 if 2020 would have ended with more pessimism.
As much as people questioned why the financial markets unexpectedly started to rise in March 2020 and continued to climb as the virus spread rapidly in the fall, I suspect that people could spend 2021 questioning why the markets are not moving higher as life gradually returns to normal.
I am also humble enough to acknowledge that the market does not do my bidding and traders’ irrational greed and fear can push markets beyond reasonable expectations, so 2021 could also provide numerous positive surprises.
Hopefully on December 31, 2021, we will be closely gathered with our mask-free friends and family to fondly reminisce about the unexpected joys of 2021 (although a bit of pessimism at year-end could lead to greater joy in 2022).
Quote of the week: Warren Buffett: “When investing, pessimism is your friend, euphoria the enemy.”
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